Replacement decisions with unequal lives consider two

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Replacement Decisions with Unequal Lives. Consider two projects, X and Y:

Project

Cost

Life

Annual After-Tax Cash Inflow

X

$50,000

10 years

$9,000

Y

50,000

15

7,500

The company's cost of capital is 10 percent.

1. Determine the adjusted NPV for each project, using the replacement chain procedure.

2. Determine the equivalent annual annuity for each project.

3. Which project should be taken?

Reference no: EM13484466

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