Table 11.11
Yong Importers,an Asian import company,is evaluating two mutually exclusive projects,A and B.The relevant cash flows for each project are given in the table below.The cost of capital for use in evaluating each of these equally risky projects is 10 percent.
-Which project should be chosen using the Annualized NPV approach? (See Table 11.11)

Question

Table 11.11
Yong Importers,an Asian import company,is evaluating two mutually exclusive projects,A and B.The relevant cash flows for each project are given in the table below.The cost of capital for use in evaluating each of these equally risky projects is 10 percent. 
-Which project should be chosen using the Annualized NPV approach? (See Table 11.11)

Quizplus · Accepted Answer

The Annualized NPV approach converts the NPV of projects with different lifespans into an equivalent annual amount. The project with the higher annualized NPV should be chosen, which is Project A in this case.

Table 11.11 Yong Importers,an Asian Import Company,is Evaluating Two Mutually Exclusive Projects,A