TNJ Corp. is considering purchasing one of two lawn mowers to reduce both labour and fuel costs: model Light or model Small. Both mowers cost $75. Model Small generates $90 of savings at the end of the first year and nothing at the end of 2 years. Model Light generates no savings at the end of the first year and $100 of savings at the end of 2 years. Graph the NPV Profiles of each model. When the cost of capital is equal to 11.11%, the NPV for both projects is $6.00. The Light project is of higher risk and TNJ applies a 13% cost of capital to the project's valuation, as opposed to a 10% cost of capital to the valuation of project small. Which of the following statements is correct.

Question 16 options:

	Project Small should be accepted because it has a higher IRR.
	The two projects cannot be compared because of differences in risk.
	Project Light should be accepted because it has a higher NPV.
	Project Small should be accepted because it has a higher NPV.