Equivalent annual annuity

Corcoran Consulting is deciding which of two computer systems to purchase. It can purchase state-of-the-art equipment (System A) for $20,000, which will generate cash flows of $5,000 at the end of each of the next 6 years. Alternatively, the company can spend $10,000 for equipment that can be used for 3 years and will generate cash flows of $5,000 at the end of each year (System B).

What is its EAA? Round your answer to the nearest cent.

Unequal Lives

Haley's Graphic Designs Inc. is considering two mutually exclusive projects. Both projects require an initial investment of $8,000 and are typical average-risk projects for the firm. Project A has an expected life of 2 years with after-tax cash inflows of $4,000 and $12,000 at the end of Years 1 and 2, respectively. Project B has an expected life of 4 years with after-tax cash inflows of $6,000 at the end of each of the next 4 years. The firm's WACC is 10%.

If the projects cannot be repeated, which project should be selected if Haley uses NPV as its criterion for project selection?

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.

Make the same assumptions as in Part b. Using the equivalent annual annuity (EAA) method, what is the EAA of the project selected? Round your answer to the nearest cent.