question archive Health Care is Us, Inc
Health Care is Us, Inc
Subject:AccountingPrice:2.86 Bought3
Health Care is Us, Inc. needs to decide between two projects with different lives. Project ‘A’ has a $15,000 initial cost, a useful life of 6 years, and a net present value of $2,550. What is the Equivalent Annual Annuity (EAA) value of Project ‘A’ using an 11% discount rate?
$8,019
$4,770
$354
$603
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D.
Step-by-step explanation
Equivalent Annual Annuity( EAA) can be calculated as:
EAA=r(NPV)/1-(1+r)-n
Where,
NPV = Net Present Value,
r = Discount rate,
n = the number of periods in the future
EAA= 11%+$2550/1-(1+11%)-6
= $602.76
=$603
