When mutually exclusive projects have different lives, the project that should be selected will have the:
A) highest IRR.
B) longest life.
C) lowest equivalent annual cost.
D)highest NPV, discounted at the opportunity cost of capital.

Question

Quizplus · Accepted Answer

When comparing mutually exclusive projects with different lives, the project with the lowest equivalent annual cost (EAC) should be selected. EAC allows for a uniform comparison of the annual cost of each project over its lifespan, making it a useful tool for evaluating projects with differing lifespans.

When Mutually Exclusive Projects Have Different Lives, the Project That