For this and the next 3 questions. Consider the following MUTUALLY EXCLUSIVE projects. Cost of capital is 10%. Calculate IRR.

Year	Project A	Project B
0	-40,000	-20,000
1	8,000	7,000
2	14,000	13,000
3	13,000	12,000
4	12,000
5	11,000
6	10,000

IRR (A) = 17.47%. IRR(B) = 25.20%

IRR (A) = 17.77%. IRR(B) = 25.20%

IRR (A) = 17.47%. IRR(B) = 20%

None of the above is completely correct

Calculate NPV

NPV(A) = 2,131.01. NPV(B) = 2,462.24

NPV(A) = 9,281.10. NPV(B) = 6,057.45

NPV(A) = 9,281.10. NPV(B) = 6,123.22

None of the above is completely correct

Calculate the equivalent annual annuity (EAA).

EAA (A) = 2,131.01. EAA (B) = 2,462.24

EAA(A) = 9,281.10. EAA (B) = 6,057.45

EAA(A) = 9,281.10. EAA (B) = 6,123.22

None of the above is completely correct

Which project should be chosen and why?

Project A; it has a higher EAA

Project B; it has a higher EAA

Both projects are equally acceptable

The purpose of Economic Life Analysis is to:

Determine the optimal investment life of a project

Determine the optimal cost of capital for a project

Evaluate two mutually exclusive projects for their crossover rate

Determine the optimal capital budget of a project

None of the above