In alternative investments, the constant cash flow stream is equal to initial cash flow stream in the approach which is classified as __________?
Correct answer: B. equivalent annual annuity
- A. greater annual annuity method
- B. equivalent annual annuity
- C. lesser annual annuity method
- D. zero annual annuity method
Explanation
The equivalent annual annuity method converts an investment's cash flows into a constant annual amount with the same present value. It is useful for comparing projects with unequal lives.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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