Consider the following two mutually exclusive investment projects that have unequal service lives:

(a) What assumption(s) do you need in order to compare a set of mutually exclusive investments with unequal service lives?
(b) With the assumption(s) defined in (a) and using i = 10%, determine which project should be selected.
(c) If your analysis period (study period) is just three years, what should be
the salvage value of Project B at the end of year 3 in order to make the two
alternatives economically indifferent?

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Project Cash Flows A B п -$1,200 -$2,100 -$400 -$400 -$300 -$300 3 -$400 + $200 -$300 п A B 4 -$300 -$300 -$300 -$300 -$300 + $500