EQUIVALENT ANNUAL ANNUITIES
1. Black Sheep broadcasting is considering a five year-project that has a weighted average cost of capital of 12% and a net present value (NPV) of $56,489. Black sheep broadcasting can replicate this project indefinitely.
What is the equivalent annual annuity (EAA) for this project?
a. $13,320
b. $19,589
c. $15,671
d. $14,104
2. An analyst will need to use the EAA approach to evaluate projects with unequal live when the projects are ________.
a. Mutually exclusive OR
b. Independent