Elaine Smith has been given responsibility for developing General Pacific Company's capital budgeting policy manual. In a meeting with her team, she makes the following statements: Statement 1: The equivalent annual annuity approach assumes continuous replacements can and will be made each time the asset's life ends. Statement 2: In comparing mutually exclusive projects with unequal lives, you should always choose the project which has the highest NPV. Is Smith most likely correct or incorrect with regards to the statements? A. Both statements are correct. B. Only one of the statements is correct. C. Neither statement is correct.