Equivalent annual annuities

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 Fuzzy Badger Transport Company:

Fuzzy Badger Transport Company is considering a four$-$year project that has a weighted average cost of capital of $11\%$ and a net present value $($NPV$)$ of $$75,682.$ Fuzzy Badger Transport Company can replicate this project indefinitely.

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

$$30,493$

$$24,394$

$$23,174$

$$26,833$

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