Replacement Decisions with Unequal Lives. Consider two projects, X and Y: Project                                 Cost       Life         Annual After-Tax Cash Inflow X...

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

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?