Capital Budgeting B10-08b

How is the Equivalent Annual Annuity Approach (EAAA) calculated?

  1. Calculate the NPV for each project.
  2. The EAA of a project is the amount where, the annual discounted cash flows over the life of the project, exactly equals the NPV of the project.
  3. The project with the highest EAA is most desirable. 
February 23, 2019 | |