The annual annuity stream of payments with the same present value as a project's costs is called the project's ________ cost.
A)incremental
B)sunk
C)opportunity
D)erosion
E)equivalent annual

Question

Quizplus · Accepted Answer

The annual annuity stream of payments with the same present value as a project's costs is called the project's equivalent annual cost. This metric can be used to compare different projects with different lifetimes, costs, and cash flow patterns on an equal basis. Therefore, option E is the correct answer. Option A, incremental cost, refers to the additional cost incurred by undertaking a project compared to the baseline. Option B, sunk cost, refers to a cost that has already been incurred and cannot be recovered. Option C, opportunity cost, refers to the cost of a foregone alternative. Option D, erosion cost, is not a commonly used term in finance or accounting.

The Annual Annuity Stream of Payments with the Same Present