Cleveland Corp. can accept only one of two projects. The revenue and expenses for each of the projects is shown below. Which project should Cleveland accept if the corporation has a 8% cost of capital and a 40% marginal tax rate?
Project A Project B
Year 1 Revenue $700,000 $800,000
Expenses 500,000 525,000
Year 2 Revenue $600,000 $700,000
Expenses 425,000 550,000