The projected cash flows for two mutually exclusive projects are as follows: $\begin{array}{lll}
\text { Year }&\text { Project A }&\text { Project B } \0 & (\$ 150,000) & (\$ 200,000) \
1 & 80,000 & 40,000 \
2 & 60,000 & 50,000 \
3 & 50,000 & 50,000 \
4 & & 60,000 \
5 & & 50,000 \
6 & & 53,000
\end{array}$ If the firm's cost of capital is 10% and the equivalent annual annuity method is used to eliminate the disparity between the projects' lives, which project should be undertaken?

Question

The projected cash flows for two mutually exclusive projects are as follows: $\begin{array}{lll}
\text { Year }&\text { Project A }&\text {  Project B } \0 & (\$ 150,000) & (\$ 200,000) \
1 & 80,000 & 40,000 \
2 & 60,000 & 50,000 \
3 & 50,000 & 50,000 \
4 & & 60,000 \
5 & & 50,000 \
6 & & 53,000
\end{array}$ If the firm's cost of capital is 10% and the equivalent annual annuity method is used to eliminate the disparity between the projects' lives, which project should be undertaken?

Quizplus · Accepted Answer

The Answer of The projected cash flows for two mutually exclusive projects are as follows: $\begin{array}{lll}
\text { Year }&\text { Project A }&\text {  Project B } \0 & (\$ 150,000) & (\$ 200,000) \
1 & 80,000 & 40,000 \
2 & 60,000 & 50,000 \
3 & 50,000 & 50,000 \
4 & & 60,000 \
5 & & 50,000 \
6 & & 53,000
\end{array}$ If the firm's cost of capital is 10% and the equivalent annual annuity method is used to eliminate the disparity between the projects' lives, which project should be undertaken?

The Projected Cash Flows for Two Mutually Exclusive Projects Are