Which technique is most suitable for comparing mutually exclusive projects with unequal useful lives when replacement is assumed?
Correct answer: C. Equivalent annual cost method
- A. Accounting rate of return
- B. Simple payback method
- C. Equivalent annual cost method
- D. Current ratio method
Explanation
The equivalent annual cost method converts the costs of projects with different lives into comparable annual amounts. This helps decision makers compare replacement alternatives on a consistent time basis.
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