Question

Project Max has an NPV of $875,000 and will last 13 years. Project Span has an NPV of $1,225,000 and will last 17 years. Both projects have a required rate of return of 15%. Assuming that these projects can be replicated over and over again once completed, and that only one of the two can be accepted, which project would you recommend?

Answer 1

Answer
Project Max
NPV	$    875,000.00
Period	13 Years
Required rate	15%
Equivalent Annual Benefit	NPV/ Annuity Factor
	875000/(((1-(1.15)^-13))/0.15)
	$    156,721.65
Project Span
NPV	$ 1,225,000.00
Period	17 Years
Required rate	15%
Equivalent Annual Benefit	NPV/ Annuity Factor
	1225000/(((1-(1.15)^-17))/0.15)
	$    202,574.41
Since EAB of Project span ($202,574) is more than project Max($156,721)
Project Span should be Accepted