You receive the following information regarding two potential investment opportunities:

Investment A	Investment B
Initial cost: $1,200,000	Initial cost: $1,100,000
Cash flow Year 1: $400,000	Cash flow Year 1: $900,000
Cash flow Year 2: $500,000	Cash flow Year 2: $400,000
Cash flow Year 3: $500,000	Cash flow Year 3: $500,000
Cash flow Year 4: $600,000	Cash flow Year 4: $600,000
Cash flow Year 5: $600,000	Total cash flows: $1,300,000
Total cash flows: $1,400,000

You can only choose one investment opportunity and the rate of return is required to be 8%

a) Which appears more lucrative, only looking at the cash flows over the lifetime of the investments?

b) Evaluate the two investment opportunities, using the net present value technique. Make use of the following extract from a discount table in your calculations.

	1%	2%	3%	4%	5%	6%	7%	8%	9%	10%
1	0.990	0.980	0.971	0.962	0.952	0.943	0.935	0.926	0.917	0.909
2	0.980	0.961	0.943	0.925	0.907	0.890	0.873	0.857	0.842	0.826
3	0.971	0.942	0.915	0.889	0.864	0.840	0.816	0.794	0.772	0.751
4	0.961	0.924	0.888	0.855	0.823	0.792	0.763	0.735	0.708	0.683
5	0.951	0.906	0.863	0.822	0.784	0.747	0.713	0.681	0.650	0.621

Complete the following answer template:

Investment A	Discount factor	Net present value
TOTAL:

Investment B	Discount factor	Net present value
TOTAL:

c) Based on the calculations performed in above, which one of the two investments should the business pursue and why (justify your reply).