CSL ltd is faced with choosing between two mutually exclusive projects with different lives. It requires a return of 12% on these projects. Project A requies an initial outlay at time 0 of $5,000,000and is expected to require annual maintenance cash outflows of $3,100,000 per year over its two year life . Project B requires an initial outlay at time 0 of $6,000,000 and is expected to require annual maintenance cash outflows of $2,600,000 per year over its three year life. Both projects are acceptable investments and provide equal quality service. the comapany assumes that the replacement and maintenance costs for both projects will remain unchanged over time.

1. Find the NPV of each project over its life

2.Which project would you recommend based on your finding? What is wrong with choosing the best project based on its NPV?