10-17A. (BAAs) The Andrzejewski Corporation is considering two mutually exclusive projects, one with a three-year life and one with a seven-year life. The after-tax cash flows from the two projects are as follows:

a. Assuming a 10 percent required rate of return on both projects, calculate each project's EAA. Which project should be selected?

b. Calculate the present value of an infinite-life replacement chain for each project.

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YEAR PROJECT A PROJECT B -$50,000 20,000 -$50,000 36,000 20,000 36,000 3 20,000 36,000 20,000 20,000 6 20,000 7 20,000