1. ABC Limited is evaluating two mutually exclusive projects. Project A will cost US 1,000,000 now and generate cash flows of US 500,000 each year over its useful life of four years. Project B. will cost US 2,500,000 and will generate cash flows of US 1,200,000 over its useful life of three years.

The cost of capital is 12%

Required:

Advise the management of the company on the project to undertake using the equivalent annual net present value (EANPV) approach from your computation.