Which of the following methods of evaluating investment projects can properly evaluate projects of unequal lives?
A) The net present value.
B) The payback.
C) The internal rate of return.
D) The equivalent annual annuity.

Question

Quizplus · Accepted Answer

The equivalent annual annuity is the only method that can properly evaluate projects of unequal lives as it converts the cash flows of each project into an equal annual series of cash flows. This allows for a direct comparison of the projects over their respective lives. The net present value and internal rate of return methods assume equal lives for each project, while the payback method is a simplistic evaluation that does not take into account the time value of money or cash flows beyond the payback period.

Which of the Following Methods of Evaluating Investment Projects Can