Two mutually exclusive projects are analyzed using a 12.5% discount rate. Project 1 has a life of 6 years and Project 2 has a life of 3 years. The NPV of Project 1 is $43 million and the NPV of Project 2 is $27 million. When Project 2 ends in year 3, it can be renewed for another 3 years with the same cash flows. Using the least common multiple method, which project should the company choose?

Question 1 options:

	Project 1 should be chosen because its NPV is greater than the 6-year NPV for replicating Project 2, $41.05 million.
	Project 1 should be chosen because its NPV is greater than the 6-year NPV for replicating Project 2, $38.83 million.
	Project 2 should be chosen because the 6-year NPV for replicating Project 2 is $45.96 million, which is greater than $43 million.