ou are evaluating two mutually exclusive projects. The cost of capital is 12% and the cash flows are as follows:

Year Project A Project B

0 -$30,000 -$30,000

1 10,500 6,500

2 10,500 6,500

3 10,500 6,500

4 10,500 6,500

5 6,500

6 6,500

7 6,500

8 6,500

a. Calculate the NPV of Project A.

b. Calculate the NPB of Project B.

c. Create a replacement chain for Project A. Calculate the NPV assuming the cost and cash flows will remain the same in years 5 through 8.

d. Which project would you select?

e. Use the equivalent annual annuity approach and calculate the NPV of Project A.

f. Use the equivalent annual annuity approach and calculate the NPV of Project B.

g. Is your decision in part f the same as in part d?