Evaluate alternative investments with unequal lives
1) Why is it important to consider cannibalization in situations where a company is considering adding substitute products to its product line?
2) Holding the cutoff period fixed, which method has a more severe bias against long-lived projects, payback or discounted payback?
3) Explain why the equivalent annual cost (EAC) method helps firms evaluate alternative investments with unequal lives
4) How does the calculation of the after-tax WACC differ from that of the before-tax WACC? Which method is typically applied in the United States? Why?
