2. You are comparing two pieces of equipment with different life expectancies. Their cashflow streams are as below. In order to compare them on an equal basis, we assume that we will run both pieces of equipment forever by replacing them every 4 and 5 years, respectively.

A. (10) What is the net PV of equipment As cashflow, if run just once?

B. (10) What is the net PV of equipment Bs cashflow, if run just once?

C. (20) What is the net PV of equipment As cashflow, if run forever?

D. (20) What is the net PV of equipment Bs cashflow, if run forever?

Discount rate at 10% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Equipment A (4-Yr Life) -$35 $20 $12 $14 $8 Equipment B (5-Yr Life) $45 $21 $12 $15 $10 $16