Question: 3.3 The cash flows for two mutually exclusive projects with different lives are given below: Year Project AProject B 10.00 6.00 6.00 10.00 6.55 6.55

3.3 The cash flows for two mutually exclusive projects with different lives are given below: Year Project AProject B 10.00 6.00 6.00 10.00 6.55 6.55 6.55 PROBLEM SET 73 The opportunity cost of capital for project A is 10%, but project B is much riskier and has a 40% cost of capital. a) What is the simple NPV of each project? b) What is the NPV(N, co) of each project? c) What is the annual equivalent value [see Eq. (3.5)] of each project? d) Which project should be accepted? Why

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