When evaluating two competing proposals with unequal lives, management should give greater consideration to the investment with the longer life because the asset will be useful to the company for a longer period of time.

Question

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When evaluating two competing proposals with unequal lives, management should consider the net present value (NPV) or equivalent annual cost (EAC) of each proposal rather than just the life span, to account for the time value of money and ensure a fair comparison.

When Evaluating Two Competing Proposals with Unequal Lives, Management Should