The Cash Flows for Two Projects, a and B, Are

question 49

Multiple Choice

The cash flows for two projects, A and B, are shown in the table, below. Notice that Project A has a life of 5 years and Project B has a 3 year life. Calculate the NPV of each project and calculate which should be adopted using the equivalent annual annuity approach. Assume that the cost of capital is 10%. $$\begin{array} { | c | c | c | } \hline & \text { Project CFs } & \text { Project CFs } \\\hline \text { Time } & \text { A } & \text { B } \\\hline 0 & - 100 & - 150 \\\hline 1 & 20 & 75 \\\hline 2 & 25 & 60 \\\hline 3 & 30 & 50 \\\hline 4 & 30 & \\\hline 5 & 40 & \\\hline \text { NPV } & 6.7097 & 5.3343 \\\hline\end{array}$$

• A)Project A is better.
• B)Project B is better.
• C)The two projects are the same.

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Concise written accounts of a person's life, achievements, and contributions to their field or society.

Lived Longer

Refers to having a life span that exceeds the average duration for a specific population, organism, or entity.

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