11. The projected cash flows for two mutually exclusive projects are as follows:

Year	Project A	Project B
0	($150,000)	($200,000)
1	80,000	40,000
2	60,000	50,000
3	50,000	50,000
4		60,000
5		50,000
6		53,000

If the cost of capital is 10%, does the equivalent annual annuity method give a clear indication of which project should be undertaken? Calculate the EAAs for both projects and comment on the result.

12. Use the following information for the next four questions. Norlin Corporation is considering an expansion project that will begin next year (Time 0). Norlin's cost of capital is 12%. The initial cost of the project will be $250,000, and it is expected to generate the following cash flows over its five-year life:

Year	$
1	$40,000
2	$60,000
3	$90,000
4	$90,000
5	$90,000

a) What is the payback period for the expansion project?

i)3.67 years

ii)4.00 years

iii)4.25 years

iv)4.67 years

v)5.00 years

b) What is the net present value (NPV) of for the expansion project?

i)($45,197)

ii)$5,871

iii)$13,784

iv)$25,726

v)$120,000

c) What is the internal rate of return (IRR) for the expansion project?

i)4.13%

ii)6.50%

iii)10.36%

iv)12.83%

v)14.67%

d) What is the Profitability Index (PI) for the expansion project?

i)1.02

ii)1.05

iii)1.10

iv)1.48

v)Cannot be determined