Each project has a 10-year life span with no residual value. The initial investment on each is $15,000. The Weighted Average Cost of Capital (WACC) is 5% for each project as well. The difference between the projects is cash flows.

• Project 1 has a steady stream of cash flows, $2,000 annually throughout its life.

• Project 2’s cash flows start with $2,450 per year but decrease by $100 per year

throughout its life.

• Project 3 starts with $1,550 in year one but increases by $100 per year

throughout its life.

Using the NPV method, determine which investment is the better capital investment and please explain why.

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