$12\mathrm{.}2$ Net Present Value Method

JT Engineering is considering two projects. Project A will generate $$140,000$ net cash flows over $6$ years, and annual cash flows will decrease over time. Project B will also generate $$140,000$ over $6$ years, and cash flows will remain equal. Which project has the higher net present value $($NPV$)?$

Project B$\text{'}$s NPV is higher than Project A$\text{'}$s NPV$.$

Both Project A and Project B have the same NPV$.$

Since Project B has equal cash flows, the present value of its cash flows will be calculated using the present value of an annuity factor resulting in a higher NPV$.$

Project A$\text{'}$s NPV is higher than Project B$\text{'}$s NPV$.$

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