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Dumb and Dumber Development Company has two mutually exclusive investment projects to evaluate. Assume both projects can be repeated indefinitely. The following cash flows are

Dumb and Dumber Development Company has two mutually exclusive investment projects to evaluate. Assume both projects can be repeated indefinitely. The following cash flows are associated with each project

Year

Project A

Cash Flow

Project B

Cash Flow

0

-$100,000

-$70,000

1

30,000

30,000

2

50,000

30,000

3

70,000

30,000

4

--

30,000

5

--

10,000

The project types are equally risky and the firms cost of capital is 12 percent. What is the EAA of the higher valued project? (Round your final answer to the nearest whole dollar.)

a. $6,857

b. $7,433

c. $11,325

d. $16,470

e. None of the above

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