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Another method to deal with the unequal life problem of projects is the equivalent annusl annuity (EAA) method. In this method the annusl cash flows
Another method to deal with the unequal life problem of projects is the equivalent annusl annuity (EAA) method. In this method the annusl cash flows under the alternative investments are converted into a constant cash flow stream whose NPV is equlvalent to the NPV of the comparative project's initial stream. Consider the case of Fuzzy Badger Transport Company: Fuzzy Badger Transport Company is considering a four-year project that has a weighted average cost of capital of 13% and a net present value (NPV) of $89,567. Fuzzy Badger Transport Company can replicate this project indefinitely. What is the equlvalent annual annulty (EAA) for this project? 570,112 $27,101 531,618 $34,629 Mn analyst will need to use the EMA approsch to evaluate projects with unequal Hives whan the projects are
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