Ch 12- Assignment - Cash Flow Estimation and Risk Analysis DUCK 10 ASSAJ Attempts Keep the Highest/2 7. Unequal project lives Praxis Corp, has to choose between two mutually exclusive projects. If it chooses project A, Praxis Corp, will have the opportunity to make a similar investment in three years. However, if it chooses project B, it will not have the opportunity to make a second investment. The following table is the cash flows for these projects. If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A and project 8, assuming that both projects have a weighted average cost of capital of 13%7 Cash Flow Project A Project B Year 0: -$15,000 Year 0: -$40,000 Year 1: 9,000 Year 1: 8,000 Year 2 15,000 Year 2 16,000 14,000 Year 31 15,000 Year 4 12,000 Year 5: 11,000 Year 6 10,000 O $17,092 O $16,265 O $14,639 @112.012 0,0 Year 2: 15,000 Year 2: 16,000 Year 3: 14,000 Year 3: 15,000 Year 4: 12,000 Year 5: 11,000 Year 6: 10,000 O $17,892 $16,265 O $14,639 $13,012 O $13,825 Praxis Corp. is considering a four-year project that has a weighted average cost of capital of 13% and a NPV of $90,760. Praxis Corp, can replicate this project indefinitely. What is the equivalent annual annuity (EAA) for this project? O $33,564 O $38,141 $36,616 O $35,090 $30,513 Grade It Now Save & Continue