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Equivalent Annual Annuity (EAA) Approach

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The EAA value represents the required size of an annual payment over an asset’s life to make the present value of the project’s operating cash flows equal to the net present value, when the cost of capital is applied as the discount rate.

EAA Process

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Mutually Exclusive Capital Projects with Unequal Lives

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Least Common Multiple of Lives Approach

01
CFA Level 2: Corporate Finance Part 1 – Introduction
02
Introduction to Capital Structure and Leverage
03
Introductory Capital Budgeting Remarks
04
Expansion Projects vs. Replacement Projects and Cash Flows
05
Impacts of Depreciation Method Choice on Capital Budget Analysis
06
Inflation and Capital Budgeting
07
Mutually Exclusive Capital Projects with Unequal Lives
08
Equivalent Annual Annuity (EAA) Approach
09
Least Common Multiple of Lives Approach
10
Stand Alone Risk and Capital Projects
11
CAPM and a Capital Project’s Discount Rate
12
Capital Projects and Real Options
13
Common Pitfalls in Capital Budgeting
14
Capital Budgeting Alternatives to NPV and IRR Analysis
15
Modigliani-Miller and Capital Structure Theory
16
Evaluating Capital Structure Policy
17
International Differences in Financial Leverage
18
Dividend and Share Repurchase Policies
19
Factors Affecting Corporate Dividend Policy Decisions
20
Signals from Dividend Policies

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Financial Analysis