Your client is investigating two established companies that operate in the same tourism sector in Australia. These two companies are investigating similar investment projects (not both) in which they will invest. However, your client is not sure which is better and has sent the relevant details to you to advise upon. the characteristics of the two projects are given below:

Project 1 Initial Outlay (IO) $74,000,000 ; Annual Cash Flows(CF) $19,000,000 Life of system 9 years

Project 2 Initial Outlay (IO) $52,000,000 ; Annual Cash Flows(CF) $12,000,000 Life of system 15 years

Additional information: All annual cash flows are after tax and depreciation. A flat rate of 18% is estimated as the risk in both of these projects.

Your client wishes you to provide detailed calculations indicating which project you believe to be the best. The client will then decide whether to invest into the company looking to invest in the project.