ABC firm is evaluating two projects.

Oil Project:

Oil Project is about oil sales. This project has the average risk level as the ABC's entire assets. Oil Project is forecasted to sale 1000 barrels at the end of the first year, and the number of barrels which can be sold is expected to grow at an annual rate of 8%.The manager of Oil Project controls the oil price risk with the oil futures contracts, so that the saling price of oil per barrel at the end of the first year is $1200 per barrel, and the saling price is expected to grow at an annual rate of 4%.Suppose the maintanance cost is $0.2 million at the end of the first year, and is growing at 3% each year.The Oil Project is expected to be sold to another company at the end of the year 5 with the saling price of $1 million. The initial investment is $10 million.What is the NPV of Oil Project?

Water Cleaning Project:

Water Cleaning Project is riskier than the Oil Project. A comparable company, DEF Clean, which is focusing on doing water cleaning business has a WACC of 50%..Suppose the net cash flow of this project is expected to be $3 million at the end of year 1, $5 million at the end of year 2, $40 million at the end of year 3.This project requires $15 million as initial investment.What is the NPV of Water Cleaning Project?

Which project should ABC firm invest?