Another method to deal with the unequal life problem of projects is the equivalent annual annuity (EAA) method. In this method the annual cash flows under the alternative investments are converted into a constant cash flow stream whose NPV is equivalent to the NPV of the comparative projects initial stream.

Three Waters Boatbuilders is considering a four-year project that has a weighted average cost of capital of 13% and a net present value (NPV) of $90760. Three Waters Boatbuilders can replicate this project indefinitely.

1.)The equivalent annual annuity (EAA) for this project is_____?

2.)The EAA approach to evaluating projects with unequal lives does/does not do a good job of taking inflation into account.