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QUESTION 38 Crossborder, Inc. is considering Project A and Project B, which are two mutually exclusive projects with unequal Iives. Project A is an eight-year
QUESTION 38 Crossborder, Inc. is considering Project A and Project B, which are two mutually exclusive projects with unequal Iives. Project A is an eight-year project that has an initial outlay or cost of $140,000. Its future cash inflows for years 1 through 8 are the same at $36,500 Project B is a six-year project that has an initial outlay or cost of $160,000. Its future cash inflows for years 1 through 6 are the same at $48,000. Crossborder uses the equivalent annual annuity (EAA) method and has a discount rate of 13 %. Which project(s), if any, will Crossborder accept? O Crossborder will take Project B because it has a positive NPV and its EAA is greater than that for Project A O Crossborder accepts Project A because its EAA of about $7,975 is greater than Project B's EAA of about $6,440 O Crossborder accepts both projects because both have a positive NPV (and thus positive EAA) O Crossborder rejects both projects because both have a negative NPV (and thus negative EAA)
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