In order to compare projects with unequal lives, one of the ways is to calculate EAA (Effective Annual Annuity) from NPV. Could someone show me how to calculate EAA from NPV using BA II calculator? Here is an example, CF0 = -$20,000 CF1 = $7,000 CF2 = $13,000 CF3 = $12,000 Discount rate I = 12% I can get NPV = $5,155 and IRR = 25.2% But how to convert this to EAA using BA II calculator?
Proceed just as you would with a time value problem. Punch in 5,155 as “PV”, 3 as “N”, 12 as “I/Y”, 0 as “FV”, then “CPT” followed by “PMT” to get to the EAA. You will get a negative number because the BA II thinks it must be a cash outflow. But the value is correct. Have you changed calculators from Level I…?