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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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