7. 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 Spain and the United States, and the Spanish project is expected to take six years, whereas the U.S. project is expected to take only three years. However, the firm plans to repeat the U.S. 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: Spanish Project Cash Flow Project: Cash Flow Year o -$650,000 Year 1 $220,000 Year 2 $240,000 Year 3 $245,000 Year 4 $270,000 Year 5 $120,000 $100,000 Year 6 U.S. 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 Spanish project? O $247,132 O $224,665 O $235,898 O $179,732 If BTR Warehousing's cost of capital is 11%, what is the NPV of the Spanish project? $247,132 $224,665 $235,898 $179,732 If BTR Warehousing's cost of capital is 11%, what is the NPV of the U.S. project? $170,703.49 $155,625.54 $152,721.98 $152,187.11 What is the EAA for the U.S. project? $68,762.08 $61,361.07 $69,854.10 $55,808.85 What is the EAA for the Spanish project? $53,105.53 $139,543.09 $57,479.90 $113,256.30 U.S. project because it has the If the CFO uses the EAA approach to decide which project to undertake, he should choose the highest EAA. project because it has the If the CFO uses the EAA approach to decide which project to undertake, he should choose the Spanish lowest EAA