The replacement chain approach and the equivalent

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solutions provided. The replacement chain approach, and the equivalent annual cost (EAC), which compare the PMT for each projects. 6. 6. According to China's special national conditions, SOE is controlled by the government . SOE have significant political position in China. Some important political people used to in charge of some important stated-own enterprises, usually being their CEOs, which means SOEs in China are closely related to politics, because the nation need to own most valuable and giant corporations to ensure the stability and development of the whole society so that people can have confidence in China's economic development. As a result, SOE should have the enough government support including funds, infrastructure and manpower. Therefore it does not need to take risks as other companies do. What SOE needs is steady development and growth. From this point, we prefer to choose project 5. Because it receives equal cash flow in the following 15 years after the first year investment, without large cash out flow in the
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final year like project 4, or fluctuate cash flow like other projects. It shows pretty long-range, stable and safe characteristics. The value of NPV in project 5 is also positive, which means that the enterprise can get excess money over the intial investment.
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The replacement chain approach and the equivalent annual...

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