XXX Co. has opportunity invest in two projects. It has 14% after-tax required rate of return and a 40% income tax rate. Assume depreciation is calculated on a straight line basis. Assume all cash flows occur at year-end except for initial investment amounts

Project (1) project (2) Initial investment $300,000 240,000 Annual cash flow from operations $60,000 $50,000 Cash flow from terminal disposal 20,000 12,000 Useful life 7 5 An investment in working capital 10000 6000 Present value at 14% for year 1= 0.893, 2=0.797, 3=0.712, 4=0.636, 5=0.611, 6=0.578, 7=0.510