1. G. Norohna and Co. is considering two mutually exclusive projects. The expected values for each projects cash flows are given below.

Year Project A Project B

0 -$300,000 -$300,000

1 100,000 200,000

2 200,000 200,000

3 200,000 200,000

4 300,000 300,000

5 300,000 400,000

The company has decided to evaluate these projects using the certainty equivalent method. The certainty equivalent coefficients for each projects cash flows are given below.

Year Project A Project B

0 1.00 1.00

1 .95 .90

2 .90 .80

3 .85 .70

4 .80 .60

5 .75 .50

Given that this companys normal required rate of return is 15% and the after-tax risk-free rate is 8%, which project should be selected?