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EQUIVALENT ANNUAL ANNUITIES
1. Black Sheep broadcasting is considering a five year-project that has a weighted average cost of capital of 12% and a net present value (NPV) of $56,489. Black sheep broadcasting can replicate this project indefinitely.
What is the equivalent annual annuity (EAA) for this project?
a. $13,320
b. $19,589
c. $15,671
d. $14,104
2. An analyst will need to use the EAA approach to evaluate projects with unequal live when the projects are ________.
a. Mutually exclusive OR
b. Independent
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Draw a time line to show the cash flows of the project and compute the project's payback period, net present value (NPV), profitability index (PI), and internal rate of return (IRR).
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Describe how you, as an analyst, would estimate the potential impact of the Huntingdon Ingalls Industries spin-off on the long-term value of Northrop Grumman’s share price?
Suppose the current exchange rate for the Polish zloty is Z 2.94. The expected exchange rate in three years is Z 3.01. What is the difference in the annual inflation rates for the United States and Poland over this period?
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