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    Equivalent Annual Annuity for projects with unequal length

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    Two Projects with unequal length and cost of capital 10%. Which is the best project and please show the steps how to solve for equivalent annual annuity in unequal projects.

    Yr. 0 Project 1: ($150,000) Project 2: ($200,000)
    1 $80,000 $40,000
    2 $60,000 $50,000
    3 $50,000 $50,000
    4 $60,000
    5 $50,000
    6 $53,000

    Please show steps to solve.

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    Solution Preview

    Two Projects with unequal length and cost of capital 10%. Which is the best project and please show the steps how to solve for equivalent annual annuity in unequal projects.

    Yr Project 1 Project 2
    0 ($150,000) ($200,000)
    1 $80,000 $40,000
    2 $60,000 $50,000
    3 $50,000 $50,000
    4 $60,000
    5 $50,000
    6 $53,000
    PVIFA= Present Value Interest Factor for an Annuity
    It can be read from tables or calculated using the following equation
    PVIFA( n, r%)= =[1-1/(1+r%)^n]/r%

    Step 1: Calculate the NPV of each project

    Net Present ...

    Solution Summary

    Calculates Equivalent Annual Annuity for two projects with unequal length.

    $2.19

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