The equivalent annual revenue for Project S is $2,380.95 and $1,952.92 for Project L. IF these projects are mutually exclusive, Project S should be accepted because its equivalent annual revenue is higher than that of Project L. 3. When the chain of substitution approach is used, Project S should be chosen because it has a higher NPV.4. In this scenario, Project L should be chosen because its NPV is higher than Project L. The $105,000 is included in the year 2.l cash flow. If operated for the full 3 years, the NPV of this project is -$123.22. The NPV for a 2 year resolution is $214.88 and -$272.73 for a resolution at the end of year 1. The project should be used for 2 years and then terminated at the end of two years, which corresponds to its economic life.m. One problem that may occur is lack of capital. A lack of capital means fewer projects can be pursued unless more capital is raised. If more capital is raised, the cost of capital will also increase, which will lead to the change in the acceptability of some projects. The second problem that could arise is capital rationing. The capital budget may be limited due to lack of equity capital or lack of qualified personnel