Question: Compare the following projects using the NPV method and the EAA method if the cost of capital is 15%. Year Project A Project B 0

  1. Compare the following projects using the NPV method and the EAA method if the cost of capital is 15%.

Year

Project A

Project B

0

($500,000)

($500,000)

1

$175,000

$155,000

2

$225,000

$155,000

3

$300,000

$155,000

4

$200,000

$155,000

5

$155,000

6

$155,000

7

$155,000

8

$155,000

  1. Use the information given in problem 8 to replicate Project A and compute the NPV of the new project that lasts for 8 years.

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