Goga is evaluating three projects to maximize its shareholder's...

Goga is evaluating three projects to maximize its shareholder's value. The three projects A, B, and C are equally risky. The company's required cost of capital for evaluating Project A, B and C is 11%, 8% and 12%, respectively. The initial outlay and annual cash flows over the life of each project are shown in the table below.

Project AProject BProject C

Initial Outlay (CF0)(50,000.00)35,000.0060,000.00

Year (t) Cash Inflows (CFt)

1 8,000.00 6,000.00 18,000.00

2 8,000.00 12,000.00 18,000.00

3 8,000.00 15,0000.0 18,000.00

4 8,000.00 22,000.00 18,000.00

5 8,000.00 - 18,000.00

6 8,000.00 - -

Required:

6.1.Calculate the NPV for each project over its life. Rank the projects in descending order based on NPV.[7]

6.2.Use equivalent annuity (EAC) approach to evaluate and rank the projects in descending order based on the EAC.[7]

6.3. Use replacement chain method to evaluate and rank the projects in descending order.[5]

6.4.Compare and contrast your findings in parts (6.1), (6.2) and (6.3). Which project would you recommend that the company implement? Why?