Scenario: A corporation is evaluating two mutually exclusive projects with the following cash flows:

• Project A:
  • Initial Investment: $10,000
  • Year 1: $4,000
  • Year 2: $4,000
  • Year 3: $4,000
  • Year 4: $4,000
• Project B:
  • Initial Investment: $12,000
  • Year 1: $5,000
  • Year 2: $5,000
  • Year 3: $5,000
  • Year 4: $5,000

The company's cost of capital is 10%.

Requirements:

1. Compute the NPV for both projects.
2. Calculate the IRR for both projects.
3. Determine the Payback Period for both projects.
4. Analyze which project should be accepted and why.
5. Calculate the Equivalent Annual Annuity (EAA) for both projects.