When mutually exclusive projects have different lives, the project which should be selected will have the:
A)highest IRR.
B)longest life.
C)lowest equivalent annual cost.
D)highest NPV, discounted at the opportunity cost of capital.

Question

Quizplus · Accepted Answer

The correct choice is the project with the lowest equivalent annual cost (EAC) when comparing mutually exclusive projects with different lives. EAC allows for a uniform comparison of the costs of projects over their respective lifespans, making it a more appropriate measure than simply looking at IRR, life span, or NPV alone.

When Mutually Exclusive Projects Have Different Lives, the Project Which