This preview shows page 1. Sign up to view the full content.
Unformatted text preview: B = 9.256 ≈ $9.26 million. Project A is the better project and will increase the company's value by $12.76 million. The EAA of plane A is found by first finding the PV: N = 5, I/YR = 12, PMT = 30, FV = 0; solve for PV = − 108.143. The NPV is $108.143 − $100 = $8.143 million. We convert this to an equivalent annual annuity by inputting: N = 5, I/YR = 12, PV = − 8.143, FV = 0, and solve for PMT = EAA = 2.259 ≈ $2.26 million. For plane B, we already found the NPV of 9.256. We convert this to an equivalent annual annuity by inputting: N = 10, I/YR = 12, PV = − 9.256, FV = 0, and solve for PMT = EAA = 1.638 ≈ $1.64 million....
View
Full
Document
This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
 Spring '08
 Staff

Click to edit the document details