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Zellars, Inc. is considering two mutually exclusive projects, A and B. Project A costs $75,000 and is expected to generate $48,000 in year one and $45,000 in year two. Project B costs $80,000 and is expected to generate $34,000 in year one, $37,000 in year two, $26,000 in year three, and $25,000 in year four. Zellars, Inc.'s required rate of return for these projects is 10%.

Project A: NPV=$5,826, Profitability Index=1.08, Internal Rate of Return= 15.81%

Project B: NPV=$18,097, Profitability Index=1.23, Internal Rate of Return= 20.79% Question 1) Using the above information, which project would you recommend using the replacement chain method to evaluate the projects with different lives? a. Project B because its life is longer than Project A. b. Project A because its replacement chain NPV is $21,652, which exceeds the NPV for Project B. c. Project A because its replacement chain NPV is $15,642, which exceeds the NPV for Project B. d. Project B because the replacement chain NPV for Project A is only $10,642. Question 2) Using the above information, the equivalent annual annuity amount for project A is ________. a. $2,889 b. $3,357 c. $4,485 d. $5,532

Question 3) Using the above information, the equivalent annual annuity amount for project B is ________. a. $3,875 b. $4,994 c. $5,709 d. $6,851

If you can, please show the formula for the equivalent annual annuity amount. Thank you in advance.

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