Gogo2

Goga is evaluating three projects to maximize its shareholder's value. The thre projects A, B, and C are equally risky. The company's required cost of capital for evaluating each of the projects is 11 percent. The initial outlay and annual cash flows over the life of each project are shown in the table below. Project A 35,000.00 Cash Inflows (CF 6,000.00 12000 00 15.0000 22,000.00 60,00000 Year (t 8,00000 8,000.00 8,000.00 8,000.00 8,000.00 8,000.00 180000 18.000.00 18,00000 18,000.00 18,00000 2 5 Required: 6.1. Calculate the NPV for each project over its life. Rank the projects in descending order based on NPV. [6] 6.2. Use equivalent annuity (EAC) approach to evaluate and rank the projects in descending order based on the EAC. [6] 6.3. Use replacement chain method to evaluate and rank the projects in descending order [4] 6.4. Compare and contrast your findings in parts (6.1), (6.2) and (6.3). Which project would you recommend that the company implement? Why? [4]