Question: ABC Corporation is evaluating two mutually exclusive projects, Project A and Project B, with the following cash flows: Project A: Initial Investment: $500,000 Cash Flows:

  • ABC Corporation is evaluating two mutually exclusive projects, Project A and Project B, with the following cash flows:

    Project A:

    • Initial Investment: $500,000
    • Cash Flows: $150,000 per year for 5 years

  • Project B:

    • Initial Investment: $700,000
    • Cash Flows: $180,000 per year for 4 years

  • Calculate the equivalent annual annuity (EAA) for each project and recommend the better investment.

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