Unequal Project Lives: Allied is analyzing two new machines that will upgrade its old machine for its health-food product, i.e. these two new machines are mutually exclusive. Machine A can be used for 6 years, and Machine B can be used for 3 years. The health-food product is very successful, so the machines will be repurchased at the end of each machine's useful life. In other words, the machines are "repeatable" projects. Below is the timeline for each machine. First, calculate the NPV for each machine according to the original timeline. What would be your choice between these two machines, according to this traditional analysis? Then, make adjustment for the unequal lives issues between these two machines. What would be your choice between these two machines, after adjusting for the unequal lives? Part I. Traditional Analysis Machine A: WACC 10% + + + + Period 0 1 2 3 4 5 6 Time Line: ($5,000) $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 NPVA Machine B: + Years 0 1 Time Line: ($3,500) $1,500 $1,500 $2,000 NPVB Your Choice according to traditional analysis, which is inappropriate in this situation: Part II. Replacement Chain Adjustment WACC 10% Machine A: + + + + Period 0 1 3 5 6 2 4 Time Line: ($5,000) $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 NPVA Machine B + + 0 3 5 6 Time Line: NPVs Your Choice: Part III. Equivalent Annual Annuity (EAA) Method Machine A Machine B PV: N: VYR: FV: PMT EAA: Your Choice