Replacement decisions with unequal lives consider two

Reference no: EM13484466 , Length: 15

Replacement Decisions with Unequal Lives. Consider two projects, X and Y:

Project	Cost	Life	Annual After-Tax Cash Inflow
X	$50,000	10 years	$9,000
Y	50,000	15	7,500

The company's cost of capital is 10 percent.

1. Determine the adjusted NPV for each project, using the replacement chain procedure.

2. Determine the equivalent annual annuity for each project.

3. Which project should be taken?

Reference no: EM13484466

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