33.2
| Year 0 | Year 1 | Year 2 | Year 3 | |
| Project A | -1000 | 500 | 500 | 500 |
| Project B | -800 | 550 | 575 |
2. Assume that the discount rate is 15% per year. If you were planning to repeat one of these projects over and over again forever, which one would you choose and why? (6)
This is an EAA problem. First calculate the NPVs and then the EAAs.
Take project B because it provides more
benefit per year. That is, once we actually compare the projects
on a year-by-year basis, it is clear that B will create more
value.