Question: A firm is evaluating two mutually exclusive projects that have unequal lives. You have been hired to evaluate the projects using the annualized net present
A firm is evaluating two mutually exclusive projects that have unequal lives. You have been hired to evaluate the projects using the annualized net present value approach and recommend which project they should select. The firm's cost of capital has been determined to be 18 percent, and the projects have the following initial investments and cash flows:
| Project 1 | Project 2 | |
| Initial Investment | $40,000 | $58,000 |
| Cash Flows 1 | $20,000 | $30,000 |
| 2 | $20,000 | $35,000 |
| 3 | $20,000 | $40,000 |
| 4 | $20,000 | $20,000 |
| 5 | $20,000 | $20,000 |
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