A company has to choose between two different investments. Investment A: This investment requires an immediate outlay of $60,000 and another investment of $50,000 in year 3. The investment will return annual profits of $30,000 from year 2 to year 7. At the end of year 7, the investment has a residual value of $5,000.

Investment B: This investment requires an immediate outlay of $30,000 and additional investments of $20,000 per year from year 1 to year 3. The investment will return annual profits of $28,000 from year 4 to year 7. At the end of year 7, the investment has a residual value of $20,000.

The cost of capital is 7%.