Industrial Zone Group, which operates in building industry in South Caucasus, is considering making investments in regional projects. The CEO of the group was offered two projects regarding financing.

Project 1 requires an initial investment of $100,000 and will last 8 years; it will generate $20,000 per year. Project 2 requires an initial investment of $150,000; this project will last 10 years and will generate $28,000 per year. Which project should be taken? Why? The required rate of return is 12 percent.