PROFITABILITY ASSESSMENT OF INVESTMENT PROJECTS OF DIFFERENT ECONOMIC DURATION
Keywords:unequal lived projects, cash flows, mutually exclusive projects, equivalent annual annuity, net present value, replacement chain
When any project economical effectiveness is estimated by net present value, each project having either positive or zero net present value can be accepted provided that such project does not depend on other projects. In case of mutually exclusive projects of equal duration, the project of highest net present value will be accepted. However, in case of mutually exclusive projects of unequal duration, deciding which project is the best one is based on using various methods such as: reinvestment, cash flow method, replacement chain method and method of equivalent annual annuity.
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