The cash flows for two projects,A and B,are shown in the table,below.Notice that Project A has a life of 5 years and Project B has a 3 year life.Calculate the NPV of each project and calculate which should be adopted using the equivalent annual annuity approach.Assume that the cost of capital is 10%.

Question

The cash flows for two projects,A and B,are shown in the table,below.Notice that Project A has a life of 5 years and Project B has a 3 year life.Calculate the NPV of each project and calculate which should be adopted using the equivalent annual annuity approach.Assume that the cost of capital is 10%.
The cash flows for two projects,A and B,are shown in the table,below.Notice that Project A has a life of 5 years and Project B has a 3 year life.Calculate the NPV of each project and calculate which should be adopted using the equivalent annual annuity approach.Assume that the cost of capital is 10%. A) Project A is better. B) Project B is better. C) The two projects are the same.

Quizplus · Accepted Answer

11ea7fdb_fc8c_4de2_a768_e3a495e9ac25_TB2902_11 = NPV_A/ 11ea7fdb_fc8c_4de3_a768_eb2558a18b29_TB2902_11 = $6.7097/3.7908 = $1.77 11ea7fdb_fc8c_4de4_a768_1925c5ed3ed3_TB2902_11 = NPV_B/ 11ea7fdb_fc8c_74f5_a768_b98f3c0ce07b_TB2902_11 = $5.3343/2.4869 = $2.15 Project B is the better project.

The Cash Flows for Two Projects,A and B,are Shown in the Table,below.Notice