You are analyzing two mutually exclusive projects A &B with the following net cash flow....
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Finance
You are analyzing two mutually exclusive projects A &B with the following net cash flow.
Net Cash ($)
Year Project A Project B
0 -800,000 -80,000
1 50,000 28,000
2 50,000 28,000
4 28,000
5 28,000
Project A has a life of two years and Project B has a life of 4 years. The cost of capital is 10% for both projects. Assume that both projects will be needed in the future and they can be repeated forever without any changes in their cash flows.
By what amount does the equivalent annual annuity of project A (EAAa) exceed the equivalent annual annuity of project B (EAAb)
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