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 project's initial stream.

Consider the case of Blue Moose Home Builders:

Blue Moose Home Builders 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.$ Blue Moose Home Builders can replicate this project indefinitely.

What is the equivalent annual annuity $($EAA$)$ for this project?

$$30,112$

$$27,101$

$$28,606$

$$31,618$

An analyst will need to use the EAA approach to evaluate projects with unequal lives when the projects are