Problem Set 7

Project A has the following cash flows:

Year CF 0 -40,000 1 8,000 2 14,000 3 13,000 4 12,000 5 11,000 6 10,000

Project B has the following cash flows:

Year CF 0 -20,000 1 7,000 2 13,000 3 12,000

Assuming that the required rate is 12%, what is the Equivalent Annual Annuity (EAA) for the two projects? Based on the EAA, which project is better?

PLEASE SHOW WORK, AND ATTACH THE EXCEL FILE USED. QUESTIONS ARE NEEDED ASAP. THANK YOU.