The constant annuity payment over the life of a project that is equivalent to receiving the NPV today is the:
A)annualized annuity.
B)independent annual benefit.
C)equivalent annual profitability.
D)equivalent annual benefit.

Question

Quizplus · Accepted Answer

The constant annuity payment over the life of a project that is equivalent to receiving the NPV today is the equivalent annual benefit (EAB). EAB is a useful tool for comparing projects with different lifetimes and making decisions based on the cash flows they generate. It represents the annual cash flow that would generate the same present value as the project's total cash flows.

The Constant Annuity Payment Over the Life of a Project