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Equivalent Annual Annuity Calculator for Projects with Unequal Lives

What do these figures come to once the work is shown?

Equivalent annual annuity of two projects from NPV, life and discount rate, and which project ranks first.

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  • Nothing stored or sent
  • Free, no sign-up
Your figures
Example figuresIllustrative only. Type over them with your own.
Project A: equivalent annual annuity
$10,053
Level yearly amount with the same NPV over the project life
Project B: equivalent annual annuity
$10,024
Difference per year
$29
Drawn to one scale
Project A: equivalent annual annuity$10,053
Project B: equivalent annual annuity$10,024
Difference per year$29
Project A: NPV as a perpetuity$100,529
Project B: NPV as a perpetuity$100,243
All results
MeasureResult
Project A: equivalent annual annuity$10,053
Project B: equivalent annual annuity$10,024
Higher EAAProject A
Difference per year$29
Project A: NPV as a perpetuity$100,529
Project B: NPV as a perpetuity$100,243
How this was worked out
Work shownrecomputed as you type
EAA = NPV x r / (1 - (1 + r)^-n)
Rank projects by EAA when each will be replaced in kind
Perpetuity value = EAA / r

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • EAA = NPV x r / (1 - (1 + r)^-n)
  • Rank projects by EAA when each will be replaced in kind
  • Perpetuity value = EAA / r

How it works

Comparing NPVs of projects with different lives favors the longer project unfairly when each will be repeated. The equivalent annual annuity spreads each NPV into a level yearly amount over its own life. The project with the higher EAA adds more value per year, and wins when both repeat forever.

In the example, project B has the larger NPV, yet project A earns more per year. Replacing A every three years beats replacing B every five. EAA ranking assumes replacement in kind at the same cost and cash flows.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

When should I not use EAA?

When the projects are one-off and will not be repeated. Then compare NPV directly.

Is EAA the same as the replacement chain method?

They give the same ranking. EAA needs less arithmetic.

Can I use EAA for cost-only projects?

Yes. Enter NPVs as negative costs and pick the smaller equivalent annual cost.

Formulas on this page are the standard definitions.

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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