Allied Biscuit Co has to choose between two mutually exclusive projects If it chooses project A, Allied Biscuit Co will have the opportunity to make a similar investment in three years However, if it chooses project B, it will not have the opportunity to make a second investment The following table lists the cash flows for these projects If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A and project B, assuming that both projects have a weighted average cost of capital of 11 Cash Flow Project A Project B Year 0 $15,000 Year 0 $40,000 Year 1 9,000 Year 1 9,000 Year 2 15,000 Year 2 13,000 Year 3 14,000 Year 3 12,000 Year 4 11,000 Year 5 10,000 Year 6 9,000 $21,441 $18,225 $23,585 $13,937 $16,081 Allied Biscuit Co is considering a three year project that has a weighted average cost of capital of 11 and a NPV of $22,870 Allied Biscuit Co can replicate this project indefinitely What is the equivalent annual annuity (EAA) for this project $9,827 $9,359 $8,423 $10,763 $11,699 Allied Biscuit Co has to choose between two mutually exclusive projects If it chooses project A, Allied Biscuit Co will have the opportunity to make a similar investment in three years However, if it chooses project B, it will not have the opportunity to make a second investment The following table lists the cash flows for these projects If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A and project B, assuming that both projects have a weighted average cost of capital of 11 Cash Flow Project A Project B Year 0 $15,000 Year 0 $40,000 Year 1 9,000 Year 1 9,000 Year 2 15,000 Year 2 13,000 Year 3 14,000 Year 3 12,000 Year 4 11,000 Year 5 10,000 Year 6 9,000 $21,441 $18,225 $23,585 $13,937 $16,081 Allied Biscuit Co is considering a three year project that has a weighted average cost of capital of 11 and a NPV of $22,870 Allied Biscuit Co can replicate this project indefinitely What is the equivalent annual annuity (EAA) for this project $9,827 $9,359 $8,423 $10,763 $11,699 Allied Biscuit Co has to choose between two mutually exclusive projects If it chooses project A, Allied Biscuit Co will have the opportunity to make a similar investment in three years However, if it chooses project B, it will not have the opportunity to make a second investment The following table lists the cash flows for these projects If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A and project B, assuming that both projects have a weighted average cost of capital of 11 Cash Flow Project A Project B Year 0 $15,000 Year 0 $40,000 Year 1 9,000 Year 1 9,000 Year 2 15,000 Year 2 13,000 Year 3 14,000 Year 3 12,000 Year 4 11,000 Year 5 10,000 Year 6 9,000 $21,441 $18,225 $23,585 $13,937 $16,081 Allied Biscuit Co is considering a three year project that has a weighted average cost of capital of 11 and a NPV of $22,870 Allied Biscuit Co can replicate this project indefinitely What is the equivalent annual annuity (EAA) for this project $9,827 $9,359 $8,423 $10,763 $11,699

Question

Allied Biscuit Co  has to choose between two mutually exclusive projects  If it chooses project A, Allied Biscuit Co  will have the opportunity to make a similar investment in three years  However, if it chooses project B, it will not have the opportunity to make a second investment  The following table lists the cash flows for these projects  If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A and project B, assuming that both projects have a weighted average cost of capital of 11   Cash Flow Project A Project B Year 0  $15,000 Year 0  $40,000 Year 1  9,000 Year 1  9,000 Year 2  15,000 Year 2  13,000 Year 3  14,000 Year 3  12,000 Year 4  11,000 Year 5  10,000 Year 6  9,000 $21,441 $18,225 $23,585 $13,937 $16,081 Allied Biscuit Co  is considering a three year project that has a weighted average cost of capital of 11  and a NPV of $22,870  Allied Biscuit Co  can replicate this project indefinitely  What is the equivalent annual annuity (EAA) for this project  $9,827 $9,359 $8,423 $10,763 $11,699 Allied Biscuit Co  has to choose between two mutually exclusive projects  If it chooses project A, Allied Biscuit Co  will have the opportunity to make a similar investment in three years  However, if it chooses project B, it will not have the opportunity to make a second investment  The following table lists the cash flows for these projects  If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A and project B, assuming that both projects have a weighted average cost of capital of 11   Cash Flow Project A Project B Year 0  $15,000 Year 0  $40,000 Year 1  9,000 Year 1  9,000 Year 2  15,000 Year 2  13,000 Year 3  14,000 Year 3  12,000 Year 4  11,000 Year 5  10,000 Year 6  9,000 $21,441 $18,225 $23,585 $13,937 $16,081 Allied Biscuit Co  is considering a three year project that has a weighted average cost of capital of 11  and a NPV of $22,870  Allied Biscuit Co  can replicate this project indefinitely  What is the equivalent annual annuity (EAA) for this project  $9,827 $9,359 $8,423 $10,763 $11,699 Allied Biscuit Co  has to choose between two mutually exclusive projects  If it chooses project A, Allied Biscuit Co  will have the opportunity to make a similar investment in three years  However, if it chooses project B, it will not have the opportunity to make a second investment  The following table lists the cash flows for these projects  If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A and project B, assuming that both projects have a weighted average cost of capital of 11   Cash Flow Project A Project B Year 0  $15,000 Year 0  $40,000 Year 1  9,000 Year 1  9,000 Year 2  15,000 Year 2  13,000 Year 3  14,000 Year 3  12,000 Year 4  11,000 Year 5  10,000 Year 6  9,000 $21,441 $18,225 $23,585 $13,937 $16,081 Allied Biscuit Co  is considering a three year project that has a weighted average cost of capital of 11  and a NPV of $22,870  Allied Biscuit Co  can replicate this project indefinitely  What is the equivalent annual annuity (EAA) for this project  $9,827 $9,359 $8,423 $10,763 $11,699

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Allied Biscuit Co. has to choose between two mutually exclusive projects. If it chooses project A, Allied Biscuit Co. will have the opportunity to make

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	Cash Flow
Project A		Project B
Year 0:	$15,000	Year 0:	$40,000
Year 1:	9,000	Year 1:	9,000
Year 2:	15,000	Year 2:	13,000
Year 3:	14,000	Year 3:	12,000
		Year 4:	11,000
		Year 5:	10,000
		Year 6:	9,000