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?