Globex Corp. has to choose between two mutually exclusive projects. If it chooses project A, Globex Corp. will have the

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Globex Corp Has To Choose Between Two Mutually Exclusive Projects If It Chooses Project A Globex Corp Will Have The 1 (318.26 KiB) Viewed 49 times

Globex Corp. has to choose between two mutually exclusive projects. If it chooses project A, Globex 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 11%? Cash Flow Project A Project B Year 0: -$20,000 Year 0: -$40,000 Year 1: 11,000 Year 1: 8,000 Year 2: 17,000 Year 2: 15,000 Year 3: 16,000 Year 3: 14,000 Year 4: 13,000 Year 5: 12,000 Year 6: 11,000 O $11,616 O $12,390 $10,067 O $13,165 O $15,488 Globex Corp. is considering a three-year project that has a weighted average cost of capital of 10% and a NPV of $45,681. Globex Corp. can replicate this project indefinitely. What is the equivalent annual annuity (EAA) for this project? O $21,124 O $16,532 0 $19,287 $18,369 $20,206