A firm is evaluating two mutually exclusive projects that have unequal
lives. The firm's cost of capital has been determined to be 18
percent, and the projects have the following initial investments and
cash flows:

				Project W	Project Y
Initial investment:		$40,000	        $58,000

Cash flows:	
        1			$20,000	        $30,000
	2			20,000		35,000
	3			20,000		40,000
	4			20,000
	5			20,000

Required:
Evaluate the projects using the equivalent annual cost and recommend
which project they should select.