10. The equivalent annual annuity approach - Evaluating projects with unequal lives Evaluating projects with unequal lives BTR Warehousing is Canadian firm that wants to expand its business internationally. It is considering potential projects in both Italy and Thailand, and the Italian project is expected to take six years, whereas the Thai project is expected to take only three years. However, the firm plans to repeat the Thai project after three years. These projects are mutually exclusive, so BTR Warehousing's CFO plans to use the equivalent annual annuity (EAA) approach to analyze both projects. The expected cash flows for both projects follow: Italian Project Cash Flow Project: Cash Flow Year o -$700,000 $240,000 Year 1 Year 2 $270,000 $290,000 Year 3 Year 4 $250,000 Year 5 $130,000 Year 6 $110,000 Thai Project Cash Flow Project: Cash Flow Year o -$520,000 Year 1 $275,000 Year 2 $280,000 Year 3 $295,000 If BTR Warehousing's cost of capital is 11%, what is the NPV of the Italian project? $248,042 $210,836 O $235,640 $260,444 If BTR Warehousing's cost of capital is 11%, what is the NPV of the Thai project? O $155,625.54 O $152,187.11 O $170,703.49 O $152,721.98 What is the EAA for the Thai project? O$55,808.85 $68,762.08 O $61,361.07 $69,854.10 What is the EAA for the Italian project? O $58,631.21 O $113,256.30 O $139,543.09 $57,479.90 project because it has the If the CFO uses the EAA approach to decide which project to undertake, he should choose the EAA. Grade It Now Save & Continue Continue without saving