Question: The cash flows for two projects, A and B, are shown in the table, below. Notice that Project A has a life of 5 years

The cash flows for two projects, A and B, are shown in the table, below. Notice that Project A has a life of 5 years and Project B has a 3 year life. Calculate the NPV of each project and calculate which should be adopted using the equivalent annual annuity approach. Assume that the cost of capital is 10%.

	Project CFs	Project CFs
time	A	B
0	-100	-150
1	20	75
2	25	60
3	30	50
4	30
5	40
NPV	6.7097	5.3343

		Project A is better.
		Project B is better.
		The two projects are the same.

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