Question
In: Finance
Given the following two mutually exclusive project, calculate the equivalent annual annuity for Project B. Assume...
Given the following two mutually exclusive project, calculate the equivalent annual annuity for Project B. Assume a required rate of return of 12%. (Round to 2 decimals)
| Year | Project A | Project B |
| 0 | -500 | -600 |
| 1 | 320 | 300 |
| 2 | 320 | 300 |
| 3 | 320 | 300 |
| 4 | 300 |
Solutions
Expert Solution
| Discount rate | 12.0000% | ||
| Cash flows | Year | Discounted CF= cash flows/(1+rate)^year | Cumulative cash flow |
| (600.00) | 0 | (600.00) | (600.00) |
| 300.000 | 1 | 267.86 | (332.14) |
| 300.000 | 2 | 239.16 | (92.98) |
| 300.000 | 3 | 213.53 | 120.55 |
| 300.000 | 4 | 190.66 | 311.20 |
NPV of B = 311.20
PV = 311.20, FV = 0, N = 4, rate = 12%
use PMT function in Excel
EAA = 102.46
jeff jeffy answered 2 years agoRelated Solutions
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