Source: http://www.oliverlehmann.com/pmp-self-test/75-free-questions.htm

2. A company has to make a choice between two projects, because the available resources in money and kind are not sufficient to run both at the same time. Each project would take 9 months and would cost $250,000.1.The first project is a process optimization which would result in a cost reduction of $120,000 per year. This benefit would be achieved immediately after the end of the project.

The second project would be the development of a new product which could produce the following net profits after the end of the project:

1. year:  $  15,000 
2. year:  $  125,000 
3. year:  $  220,000 

Assumed is a discount rate of 5% per year. Looking at the present values of the benefits of these projects in the first 3 years, what is true?
a. Both projects are equally attractive. 
b. The first project is more attractive by app. 7%. 
c. The second project is more attractive by app. 5%. 
d. The first project is more attractive by app. 3%.

My work:
Option 1: 
NPV = -250,000 + 120,000/1.05 + 120,000/1.1025 + 120,000/1.157625
NPV = -250,000 + 114,285.71 + 108,843.54 + 103,660.51
NPV = 76,789.76

Option 2:
NPV = -250,000 + 15,000/1.05 + 125,000/1.1025 + 220,000/1.157625
NPV = -250,000 + 14,285.71 + 113,378.68 + 190,044.27
NPV = 67,708.66

My answer: Option 1, approx. 13% better
Source answer: d. at 3%