The present value of the total costs over a five year period for Project April is $50,000.The net present value of total costs over a 4 year period for Project October is $40,000.The company uses a discount rate of 9%.Which project should it choose and why?
A)April because it has a higher NPV.
B)April because is has a higher EAC.
C)October because it has a shorter life.
D)October because it has a lower EAC.

Question

Quizplus · Accepted Answer

The Equivalent Annual Cost (EAC) is lower for Project October, making it more cost-effective over its lifespan.

The Present Value of the Total Costs Over a Five