Unequal project lives

Widget Corp. has to choose between two mutually exclusive projects. If it chooses project A$,$

Widget Corp. 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 $10\%?$

Cash Flow

$$17,329$

$$15,754$

$$14,179$

$$11,816$

$$10,240$

Widget Corp. is considering a five$-$year project that has a weighted average cost of capital of $13\%$

and a NPV of $$30,450.$ Widget Corp. can replicate this project indefinitely. What is the equivalent

annual annuity $($EAA$)$ for this project?

$$8,657$

$$10,388$

$$7,791$

$$10,821$

$$9,090$