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Calculate the equivalent annual annuity for each project

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Reference no: EM132534895

Mutually Exclusive Projects with Unequal Lives.

Murray's Coffee House is trying to choose between two new coffee bean roasters. The required rate of return for either machine is 10%. Shown below are the after-tax cash flows associated with each machine:

year              CFX                 CFY

0                (50,000)          (30,000)

1                  20,000               20,000

2                  20,000              20,000

3                 20,000

4               20,000

Question a. Calculate the replacement chain NPV for each project.

Question b. Calculate the equivalent annual annuity for each project.

Question c. Which project should be selected? Why?

Reference no: EM132534895

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