(Answered) These two companies are investigating similar projects but

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These two companies are investigating similar projects (but not both projects) in which they will invest. The characteristics of the two systems are given below:

Project 1 Project 2

Initial Outlay (IO) $700,000 $2,000,000

Annual Cash Flows (CF) $350,000 $900,000

Life of system 7 years 4 years

All cash flows are after tax and depreciation.

A flat rate of 12% is estimated as the risk in both of these projects.

Decide whether to invest into the company looking to invest in the project

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