Question 5 [16 Marks] Thermal Corporation is evaluating two projects for the replacement of its old cooling unrt The existing unit has recently stopped working and has no salvage value of the two competing cooling units, B has a long life but a higher initial cost than the cheaper unit A. The following data are available for evaluation Net Cash Flow B A Year 0 -R50 000 -R79 000 1 25 000 28 000 2 25 000 28 000 3 25 000 28 000 28 000 4 5 28 000 The marginal costs of capital is 19 percent TURN OVER] w 52 Required: 51. If the projects cannot be repeated, which cooling unit should be purchased if Thermal uses NPV as its criterion for project selection? [6] Assume that the projects can be repeated and that there are no anticipated changes in the cash flows. Using the equivalent annual annuity (EAA) method, what is the EAA and NPV of the two projects? [8] Which project should be selected and why? nou vls EAA EAA= L C = Crx Mp/211-04