Question: Two projects A and B are mutually exclusive and will be repeated indefinitely. Project A requires an initial investment of $10,000 in an asset with

Two projects A and B are mutually exclusive and will be repeated indefinitely. Project A requires an initial investment of $10,000 in an asset with a life of 3 years and the project (of the same 3-year timeframe) has an NPV of $36,882.04 and equivalent annual annuity (EAA) of $14,830.81. Project B requires an initial investment of $30,000 in an asset with a life of 5 years and the project (of the same 5-year timeframe) has an NPV of $51,206.70 and EAA of $13,508.20. The cost of capital for both projects is 10%. Which is best recommendation on the projects?

a.Accept Project A because it has a lower initial investment.

b.Accept Project B because its NPV of $51,206.70 is higher than Project A's NPV of $36,882.04.

c.Accept Project A because it has a higher EAA.

d.Accept Project B because it has a lower EAA.

e.The projects are equally good so accept either project.

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