Below you have two sets of project cash flows - Project A and Project B-along with...

 

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Below you have two sets of project cash flows - Project A and Project B-along with the discount rate and NPVs for both projects. Assume that the cash flows represent annual operating costs. Which project is the least costly to operate on an annual basis? Justify your answer using the equivalent annual annuity approach. (5 pts) Project A 0 Project B 0 -500 Discount Rate = NPV Project A = NPV Project B = 1 -250 1 -200 2 -400 2 400 10% (858.38) (924.97) 3 -400 3 -400 4 -400 Below you have two sets of project cash flows - Project A and Project B-along with the discount rate and NPVs for both projects. Assume that the cash flows represent annual operating costs. Which project is the least costly to operate on an annual basis? Justify your answer using the equivalent annual annuity approach. (5 pts) Project A 0 Project B 0 -500 Discount Rate = NPV Project A = NPV Project B = 1 -250 1 -200 2 -400 2 400 10% (858.38) (924.97) 3 -400 3 -400 4 -400

Answer rating: 100% (QA)

SOLUTION To determine which project is the least costly to operate on an annual basis we can use the equivalent annual annuity EAA approach The EAA ap... View the full answer