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P12-14-Unequal lives; ANPV approach Portland Products is considering the purchase of one of three manually exclusive projects for increasing production efficiency. The firm planes 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 (CFo) -$78,000 -$52,000 -$66,000

Year (f) 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 project in descending order on the basis of NVP

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?