When evaluating projects of unequal lives, the equivalent annual cost method calculates

Multiple Choice

• the annual cost of a project by adding the intial investment and the annual pre-tax operating costs divided by the discount rate.

• the annual cost of a project dividing the intial investment by the number of operating years calculated for the project.

• the annual cost of a project considering its initial investment and its after-tax operating cost per year using time value of money.

• None of the options.