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 equalrisk 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

Calculate the NPV for each project over its life. Rank the projects in descending order on the basis of NPV.

Use the annualized net present value (ANPV) approach to evaluate and rank the projects in descending order on the basis of ANPV.

Compare and contrast your findings in parts a and b. Which project would you recommend that the firm purchase? Why?