Evaluate the following statement: The unadjusted NPVs of two projects with different useful lives can be compared to determine which project is the better of the two.

Question

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The unadjusted NPVs cannot be directly compared when the projects have different useful lives. In such cases, a modified version of NPV called Equivalent Annual Annuity (EAA) should be used to account for the different useful lives and determine which project is better.

Evaluate the Following Statement: the Unadjusted NPVs of Two Projects