P1214 Unequal lives: ANPV approach Portland Products is considering the purchase of

one of three mutually exclusive projects for increasing production efficiency. The

firm plans to use a 14% cost of capital to evaluate these equal-risk projects. The initial

investment and annual cash inflows over the life of each project are shown in the

following table.

Project X Project Y Project Z Initial investment (CF0) -$78,000 -$52,000 -$66,000 Year (t) Cash inflows (CFt) 1 $17,000 $28,000 $15,000 2 25,000 38,000 15,000 3 33,000 15,000 4 41,000 15,000 5 15,000 6 15,000 7 15,000 8 15,000

a. Calculate the NPV for each project over its life. Rank the projects in descending order on the basis of NPV. b. Use the annualized net present value (ANPV) approach to evaluate and rank the projects in descending order on the basis of ANPV. c. Compare and contrast your findings in parts a and b. Which project would you recommend that the firm purchase? Why?

*Please put in an excel file*

Thank you