Briefly describe the replacement chain (common life) and the EAA
approaches to the unequal life problem.
Is it always necessary to adjust all projects’ cash flows if different
projects have unequal lives? Explain.
Explain how a financial manager might estimate his or her firm’s
optimal capital budget.
What is capital rationing?
What factors must be considered when a firm is developing its opti-
mal capital budget?
How does a firm’s annual capital budget reflect market conditions?
