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Farma Biomedical, Inc. has only one production facility and must decide between two possible investments for the facility. Each has different cash flows and a
Farma Biomedical, Inc. has only one production facility and must decide between two possible investments for the facility. Each has different cash flows and a different life span. Given the forecasted cash flows below and using the equivalent annual annuity approach decide which project is a better investment. The company's cost of capital is 11.5%. Cash Flows ( millions) Year Year 1 100 $ 90 Year 2 $ 120 $ 110 Year $ 180 Year 4 15 points Project A (240) Project B (300) 140 195 Skipped a. What is the equivalent annual annuity of Project A? (Enter your answer in millions, rounded to two decimal places.) Equivalent annual annuity of Project million eBook References b. What is the equivalent annual annuity of Project B? (Enter your answer in millions, rounded to two decimal places.) Equivalent annual annuity of Project B million c. Which project is a better investment? Project A O Project B
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