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7. Unequal project lives Allied Biscuit Co. has to choose between two mutually exclusive projects. If it chooses project A, Allied Biscuit Co. will have the opportunity to make a similar investment in three years. However, if it chooses project B, it will not have the opportunity to make a second investment. The following table lists the cash flows for these projects. If the firm uses the replacement chain (common life) approach, what will be the difference between the net present value (NPV) of project A and project B, assuming that both projects have a weighted average cost of capital of 14% 71 Project A Year 0: Year 1: Year 2: Year 3: Cash Flow -$15,000 9,000 15,000 14,000 $18,075 $16,432 $13,967 $10,681 $13,146 Project B Year 0: Year 1: Year 2:1 Year 3: Year 4: Year 5: Year 6: -$40,000 8,000 16,000 15,000 12,000 11,000 10,000 Allied Biscuit Co. is considering a three-year project that has a weighted average cost of capital of 12% and a NPV of $49,876. Allied Biscuit Co. can replicate this project indefinitely. What is the equivalent annual annulty (EAA) for this project? $22,843 $23,881 120,766 $18,689 $25,958