You have a $1 million capital budget and must make the decision about which investments your firm should undertake for the coming year. There are three projects available and the cash flows of each project appear below. Assume a cost of capital of 12%. Which project or projects do you select?

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Project 1 Project 2 Project 3 Cash flow Year 0 $400,000 $500,000 -$1,000,000 500,000 700,000 Year 1 200,000 300,000 Year 2 300,000 350,000 Year 3 300,000 350,000 700,000