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2. Kermit Kite Co. has 2 projects under consideration Project C and Project D with the following cashflows. Project C Project D Year 0 (800,000)
2. Kermit Kite Co. has 2 projects under consideration Project C and Project D with the following cashflows.
Project C Project D
Year 0 (800,000) Year 0 (360,000)
Year 1 450,000 Year 1 200,000
Year 2 350,000 Year 2 265,000
Year 3 215,000
The firms cost of capital is 12%.
Calculate the EAA for each project. Which is the preferred project under EAA and why?
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