1. Calculate the AE given a project with an outlay of -2000 and cash flows of 1500 per year for 3 years. The discount rate is 0.1. The rate is given as a decimal (eg .12 is 12%). Answer to the nearest dollar. Do not enter the dollar sign.

Question 2

1. Use the following information on two mutually exclusive projects.

   	0	1	2	3	4
   A	-2000	1500	1500
   B	-4800	1800	1800	1800	1800

   Assume a discount rate of 11% pa and replacement of like with like into the foreseeable future. Which of the following statements is correct?

   		Project A should be selected because it has an NPV of an infinite chain of replacement of $3019 compared with project B which has an NPV of $2298.
   		Project A should be selected because it has anAE of $302 compared with project B which has an AE of $253.
   		Project B should be selected because it has an NPV of $784 compared with project A which has an NPV of $569.
   		There is not enough information to make a valid decision.
   		Project B should be selected because it has an NPV over the LCM (least common multiple) of lives of $784 compared with project A which has an NPV of $1030.
   		Project A should be selected because it has an IRR of 32% compared with project B which has an IRR of 18%.