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You are running a firm with the cost of capital of 8% and you have...

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Finance

You are running a firm with the cost of capital of 8% and you have to choose between two projects, A and B. Project A lasts six years and project B lasts eighteen years. The initial investments are $50M for project A and $65M for project B. Project A is going to generate $15M per year and project B is going to generate 12M per year. Both projects are renewable.

Which project would you chose? (Hint: Use equivalent annual annuity or replacement chain method to answer this question.)

Question 9 options:

A

B

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