Purchase Solution

Calculating Equivalent Equal Annuity Values

Not what you're looking for?

Ask Custom Question

Determine the EAA of each project using the given table:

Year Cash flows( Short) Cash flows (long)
0 -1500 -2600
1 +950 +850
2 +950 +850
3 +950 +850
4 +850
5 +850
6 +850

FOR THE Equivalent Annual Annuity, the cost of capital to be used is 8%.

Attachments
Purchase this Solution
Solution Summary

Solution describes the steps to calculate EAA in the given cases.

Solution Preview

Please refer attached file for better clarity of table.

Years Cash Flow (Short) Cash Flow (Long) PV factor, PVF PV (Short) PV (Long)
n Cn (S) Cn (L) 1/(1+8%)^n Cn(S)*PVF Cn(L)*PVF
0 -1500 -2600 1.0000 -1500.00 ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution
Free BrainMass Quizzes
Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

SWOT

This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

View More Free Quizzes
Related BrainMass Solutions

  • Relationship between NPV and IRR

    The equivalent annuity is the level annual payment across a project's specific life that has a present value equal to that of another cash-flow stream. Projects of equal size but different life can be ranked directly by their equivalent annuity.

  • Present Value and Future Value of Annuities

    The Present Value of an Annuity (PVoa) is the value of a stream of expected or promised future payments that have been discounted to a single equivalent value today.

  • Calculating IRR and NPV

    It is equivalent to an ordinary annuity with R=$25000, n=14.

  • Calculating Equal Periodic Deposits

    278181 Calculating Equal Periodic Deposits You want to have $30,000 in your savings account eight years from now, and you're prepared to make equal annual deposits into the account at the end of each year.

  • Use the Present Value of an Annuity Due

    Substitute the following values into the formula: PV_annuitydue = Present value of annuity (this what you want to find) C = Cash flow at each period = $1,500 i = interest rate per period = 0.0325/12 n = number of periods = 12 * 5 + 60 PV_annuitydue

  • Replacement Decision- Unequal Lives

    Annual Cash flow Select Machine 360-6 Answers whether the firm should replace its old knitting machine and if so, which new machine should it use by calculating equivalent annual cash flows for the two alternatives (machines).

  • Time Value of Money

    the process of calculating future values of cash flows and Discounting?the process of calculating present values of cash flows. The difference between the future value and present value is interest or discount.

  • NPV: Keep 3/4/5/6 years, equivalent annuity, MACRS real property

    Using a 5.3 percent discount rate and the equivalent annuity method, which car is the better investment? Please show the NPV, and Equivalent annuity for each type of car.

  • Various time value of money problems

    Question 24 - Calculating Annuity Future Values You are to make monthly deposits of $200 into a retirement account that pays 11 percent interest compounded monthly.

  • Estimating present balance required to meet given target

    The solution explains the steps for calculating initial balance needed so that equal preset periodic withdrawals can be made.

View More Related Solutions