Question: Mellon Corp. is considering two mutually exclusive projects to boost their tourist revenue. Project A costs $60,000 and would produce net cash flows of $25,000

Mellon Corp. is considering two mutually exclusive projects to boost their tourist revenue. Project A costs $60,000 and would produce net cash flows of $25,000 for 5 years. Project B cost $100,000 and will produce annual net cash flows of $25,000 for 10 years. If Mellon cost of capital is 12%, which project should be chosen using the equivalent annual annuity method? Show all work.

a. Project A, EAA $8,356

b. Project B, NPV is $41,250

c. Project A, NPV is $33,300

d. Project B, EAA $6,203

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