Zeta, Inc., has identified the following two mutually exclusive projects: Year 0 1 2 3 4 Cash Flow A -$20,500 10,500 15,500 Cash Flow B -$20,500 5,700 10,500 12,000 15,500 Use both the...

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Zeta, Inc., has identified the following two mutuallyexclusive projects:
Year 0 1 2 3 4
Cash Flow A -$20,500 10,500 15,500
Cash Flow B -$20,500 5,700 10,500 12,000 15,500
Use both the equal lives method and the equivalentannuity method to determine which project the company shouldimplement.

Discount Rate: 12%

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3.7 Ratings (402 Votes)

Equivalent Annual Annuity EAA for PROJECT A Period Annual Cash Flow Present Value factor at 12 Present Value of Cash Flow 1 10500 089286 937500 2 15500 079719 1235651 TOTAL 169005 2173151 Net Present Value NPV Present Value of See Answer

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Transcribed Image Text

Zeta, Inc., has identified the following two mutuallyexclusive projects:Year01234Cash Flow A-$20,50010,50015,500Cash Flow B-$20,5005,70010,50012,00015,500Use both the equal lives method and the equivalentannuity method to determine which project the company shouldimplement.Discount Rate: 12%

Year	0	1	2	3	4
Cash Flow A	-$20,500	10,500	15,500
Cash Flow B	-$20,500	5,700	10,500	12,000	15,500