You are deciding to choose between three mutually exclusive projects.

a. option1: project X will cost $5000 to install and $4000 a year to run and will last for three years.

b. option 2: project Y will cost $6000 to install and $3700 a year to run and will last for four years.

c. option 3: project Z will cost $10,000 to install and $400 a year to run and will last forever.

Let the WACC = 0.07

Estimate the NPV of project X.

Answer for part 1

Estimate the equivalent annuity cost of project X.

Answer for part 2

Estimate the NPV of project Y.

Answer for part 3

Estimate the equivalent annuity cost of project Y.

Answer for part 4

Estimate the NPV of project Z.

Answer for part 5

Estimate the equivalent annuity cost of project Z.

Answer for part 6

Which option would you choose option 1, 2 or 3?

Answer for part 7