Equivalent annual annuity method
Equivalent annual annuity method (alternatively known as EAA method) is a method that calculates the annual payments that a project will provide if it is an annuity. When comparing projects with unequal lives, the one with the higher equivalent annual annuity EAA should be chosen.
Definitions
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Equivalent annual annuity method (EAA method). A method that calculates the annual payments that a project will provide if it is an annuity. When comparing projects with unequal lives, the one with the higher equivalent annual annuity EAA should be chosen.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
