SWE Inc. must choose between two business opportunities:

Opportunity 1 will generate $40,000 before-tax cash flow in years 0, 1, and 2, with a $7,000 annual tax cost.

Opportunity 2 will also generate $40,000 before-tax cash flow in years 0, 1, and 2. However, the tax cost will be $15,000 in year 0, $2,500 in year 2, and $2,500 in year 3.

The company uses a 6% discount rate to determine net present value.

Requirements:

(1) Determine the NPV of opportunity 1 (round to nearest dollar):

(2) Determine the NPV of opportunity 2 (round to nearest dollar):

(3) Determine which opportunity the company should pick: