TA is considering investing in one of the following two projects, where the chosen project will be replicated repeatedly in the future:
Project X Project Y
Initial investment $100,000 $125,000
Life of project 3 years 4 years
Annual after-tax cash flows Year 1: $45,000 Year 1: $47,000
Year 2: $45,000 Year 2: $47,000
Year 3: $70,000 Year 3: $47,000
Year 4: $67,000
Required rate of return 10% 10%
Which project is most beneficial for TA, and what is its EAA?
