The projected cash flows for two mutually exclusive projects are as follows:
If the cost of capital is 10%, does the equivalent annual annuity method give a clear indication of which project should be undertaken? Calculate the EAAs for both projects and comment on the result

Calculator steps:
A. NPV:   CFo = -150,000, C01 = 80,000, C02 = 60,000, C03 = 50,000; NPV: I = 10
             NPV = $9,880
             EAA   PV = 9,880, N = 3, I/Y=10; solve for PMT = $3,973 = EAA
B. NPV:   CFo = -200,000, C01 = 40,000, C02 = 50,000, C03 = 50,000; C04 = 60,000, C05 = 50,000, C06 = 53,000, NPV: I = 10
           NPV = $17,196
           EAA      PV = 17,196, N = 6, I/Y=10; solve for PMT = $3,948 = EAA
The calculations indicate project A to be the better choice, but the margin is far too small to be significant. Essentially the EAA method is saying the projects are financially equivalent.