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Crockett Graphic Designs Inc. is considering two mutually exclusive projects. Both projects require an initial after - tax investment of $ 8 , 0 0
Crockett Graphic Designs Inc. is considering two mutually exclusive projects. Both projects require an initial aftertax investment of $ and are typical averagerisk projects for
the firm. Project A has an expected life of years with aftertax cash inflows of $ and $ at the end of Years and respectively. Project B has an expected life of years
with aftertax cash inflows of $ at the end of each of the next years. The firm's WACC is
a If the projects cannot be repeated, which project should be selected if Crockett uses NPV as its criterion for project selection?
Project
should be selected.
b Assume that the projects can be repeated and that there are no anticipated changes in the cash flows. Use the replacement chain analysis to determine the NPV of the
project selected. Do not round intermediate calculations. Round your answer to the nearest cent.
Since Project Selects extended NPV $ it should be selected over Project select with an NPV $
c Make the same assumptions as in part b Using the equivalent annual annuity EAA method, what is the EAA of the project selected?
Project Select should be selected.
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