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%. $$\begin{array} { | c | c | c | }
\hline & \text { Project CFs } & \text { Project CFs } \
\hline \text { Time } & \text { A } & \text { B } \
\hline 0 & - 100 & - 150 \
\hline 1 & 20 & 75 \
\hline 2 & 25 & 60 \
\hline 3 & 30 & 50 \
\hline 4 & 30 & \
\hline 5 & 40 & \
\hline \text { NPV } & 6.7097 & 5.3343 \
\hline
\end{array}$$

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%. $$\begin{array} { | c | c | c | } 
\hline & \text { Project CFs } & \text { Project CFs } \
\hline \text { Time } & \text { A } & \text { B } \
\hline 0 & - 100 & - 150 \
\hline 1 & 20 & 75 \
\hline 2 & 25 & 60 \
\hline 3 & 30 & 50 \
\hline 4 & 30 & \
\hline 5 & 40 & \
\hline \text { NPV } & 6.7097 & 5.3343 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The Answer of 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%. $$\begin{array} { | c | c | c | } 
\hline & \text { Project CFs } & \text { Project CFs } \
\hline \text { Time } & \text { A } & \text { B } \
\hline 0 & - 100 & - 150 \
\hline 1 & 20 & 75 \
\hline 2 & 25 & 60 \
\hline 3 & 30 & 50 \
\hline 4 & 30 & \
\hline 5 & 40 & \
\hline \text { NPV } & 6.7097 & 5.3343 \
\hline
\end{array}$$

The Cash Flows for Two Projects, a and B, Are