2. Given the following expected cash flows for two projects, and an opportunity cost of capital of 10%, which project is better and why? (10 points)

Expected Net Cash Flows

Year Project A Project B

0 -$10,000 -$10,000

1 $5000 $0

2 $5000 $0

3 $5000 $8,000

4 $5000 $2,000

3. Given the following expected cash flows for two projects, and an opportunity cost of capital of 8%, which project is better and why? (10 points)

Expected Net Cash Flows

Year Project A Project B

0 -$1,000 -$1,000

1 $500 $50

2 $500 $300

3 $500 $400

4 $500 $2,000