equivalent annual annuity

Definition

A formula used in comparing projects with the same net present value but different terms. It is computed as

C= r(NPV) / 1 - (1+r)-n

where, NPV is the net present value, r is the rate per period and n is the number of periods.

Use this term in a sentence

The equivalent annual annuity was a very interesting formula to me and I felt like we needed to start using it.

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You should try and figure out what your equivalent annual annuity will be so you can budget things properly for the future.

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We were attempting to compare two different securities that were identical except for different terms, we used the equivalent annual annuity metric to help.

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equivalence equivalent annual benefit