Unformatted text preview: ert back to NPV ∞ Assuming infinite replacement, the
EAAs are actually perpetuities. Get the
PV by dividing the EAA by the required
rate of return.
rate ∞ NPV 1 = 617/.14 = $4,407
∞ NPV 2 = 428/.14 = $3,057
NPV This doesn’t change the answer, of
course; it just converts EAA to a NPV
that can be compared.
View Full Document
- Winter '08
- Net Present Value