Question: You are evaluating two different bottling projects. Project 1 costs $240,000, has a 4-year life, and has pre-tax operating costs of $72,000 per year. Project

You are evaluating two different bottling projects. Project 1 costs $240,000,
has a 4-year life, and has pre-tax operating costs of $72,000 per year. Project Il costs
$375,000, has a five-year life, and has pre-tax operating costs of $42,000 per year. Both projects can be assigned to Class 8 (CA rate of 20 percent per year) and need an initial
investment in inventory of $110,000. Assume salvage value for both is 0. If your tax rate is 40% percent and your discount rate is 10 percent, which one do you prefer? Why?

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