1.When would you calculate the Equivalent Annual Annuity (EAA), or EAC? What is it that you are calculating when identifying the EAA and how would you make a financing decision based on the EAA for two different projects?

2.A simple project has the following cash flows:

Year 0 1 2 3 4 5 6

Cash Flows -$150,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000

The cost of capital for this project is estimated at 12%.

a)Should the project be accepted for this cost of capital?

b)If the cost of capital is estimated at 10% rather than at the above 12%, would be the project be accepted?