INSTRUCTIONS:This question contains two (2) parts. Respond to both parts. In your answer, use bold text to label your response to each part (e.g.Part a):Your response...)

Part a):Define Equivalent Annual Value and discuss its advantages and disadvantages, referring to the Objective of the Firm and wherever possible using examples and equations to assist your answer. Your discussion should cover the decision rules for independent and mutually exclusive projects.

Part b):Yianni has funds in his superannuation account and is considering purchasing a pension. In exchange for a lump sum payment now, Polysuper offers an annual pension over twelve years beginning with a payment of $50,000 at the start of the first year. There are twelve payments in total. The appropriate opportunity cost of funds is j₁₂= 6.00% pa what is the amount of the lump sum needed today to purchase this pension?