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In alternative investments, a constant cash flow stream equal to the initial cash flow stream is calculated using ____________?

The Equivalent Annual Annuity (EAA) method converts the Net Present Value (NPV) of a project into an equal annual cash flow over the project’s life. It is useful for comparing projects with different lifespans by standardizing cash flows into a... Read More

1 FINANCE MCQS

In alternative investments, a constant cash flow stream equal to the initial cash flow stream is calculated using ____________?

  • Greater annual annuity method
  • Equivalent annual annuity
  • Lesser annual annuity method
  • Zero annual annuity method
Correct Answer: B. Equivalent annual annuity

Detailed Explanation

The Equivalent Annual Annuity (EAA) method converts the Net Present Value (NPV) of a project into an equal annual cash flow over the project’s life. It is useful for comparing projects with different lifespans by standardizing cash flows into a constant annual amount.

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