Answer:
Missing part of question assumes minimum rate of return of 10%.
Use 5 years for both investments for comparison.
a. Net Present Value of Project 1
Present value of $19,000 annually over 5 years at 10% = 19,000 * 3.791
= $72,029
Present value of $15,000 residual value at 5th year at 10% = 15,000 * 0.621
= $9,315
Net Present value = 72,029 + 9,315 - 75,000
= $6,344
Net Present Value of Project 2
Present value of $27,000 over 5 years, 10% = 27,000 * 3.791
= $102,357
Net Present Value = 102,357 - 90,000
= $12,357
b. Present value indices
= Present value of cash inflows/ investments
Project 1 Project 2
= (72,029 + 9,315) / 75,000 = 102,357 / 90,000
= 1.08 = 1.14
