Explain how the equivalent annual annuity can be used to compare projects with different lives
Explain how the equivalent annual annuity can be used to compare projects with different lives
The equivalent annual annuity approach is used to compare projects with different lives by converting the cash flows associated with each project into a series of annual equal payments. This allows for a direct comparison of the projects, without the need to adjust for the different lives of the projects.
The equivalent annual annuity is a tool that can be used to compare projects with different lives. This is because it allows for the comparison of projects on a common basis, which is the amount of money that would be required to achieve a certain goal. This is done by taking into account the time value of money, which is the idea that money is worth more now than it will be in the future.
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