A county is considering using a piece of park land for one of two alternative recreation projects. Project A would
require construction costs of $180,000 (year 0) and generate net benefits of $40,000 per year for 8 years. (The benefits are realized at the ends of years 1 through 8). Project B would require construction costs of $2.25 million and generate net benefits of $170,000 per year for 24 years. (The benefits are realized at the ends of years 1 through 24). Each project is assumed to have zero salvage value at he end of its life. Using a real discount rate of 5 percent, the net present value of one Project A is $78,529 and the net present value of one Project B is $95,769. Which project offers larger net benefits? Show your calculations.
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