Tom Stone is trying to decide between two new sheep feeding systems for the farm. Option I requires $10,500 now, $650 for each of the next seven years, and an additional final payment of $1,000 eight years from now. Option II requires an expenditure of $12,500 now and $500 for each of the next five years.

Tom determined he will need a required rate of return of 14% annually in order to make this investment in the sheep feeding system. (16.5 points)

a. Determine the net present value (NPV) for each option.

Option I:

Option II:

b. Which project should he choose?