The firm uses a 12 percent cost of capital to evaluate

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The Smith Company is considering two mutually exclusive investments that would increase its capacity to make strawberry tarts. The firm uses a 12 percent cost of capital to evaluate potential investments. The projects have the following costs and cash flow streams:

YEAR

ALTERNATIVE A

ALTERNATIVE B

0

($30,000)

($30,000)

1

10,500

6,500

2

10,500

6,500

3

10,500

6,500

4

10,500

6,500

5

--

6,500

6

--

6,500

7

--

6,500

8

--

6,500

What are the respective EQUIVALENT ANNUAL ANNUITIES for alternatives A and B?

Reference no: EM13479455

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