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Equivalent Annual Annuity Formula

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Equivalent Annuity Cashflow refers to a series of equal cash flows that have the same present value as a given investment or series of cash flows. Check FAQs

C f = \frac{r \cdot (NPV)}{1 - {(1 + r)}^{- n}}

C_f - Equivalent Annuity Cashflow?r - Rate per Period?NPV - Net Present Value (NPV)?n - Number of Periods?

Equivalent Annual Annuity Example

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Here is how the Equivalent Annual Annuity equation looks like with Values.

Here is how the Equivalent Annual Annuity equation looks like with Units.

Here is how the Equivalent Annual Annuity equation looks like.

630 = \frac{0.5 \cdot (700)}{1 - {(1 + 0.5)}^{- 2}}

630 = \frac{0.5 \cdot (700)}{1 - {(1 + 0.5)}^{- 2}}

630 = \frac{0.5 \cdot (700)}{1 - {(1 + 0.5)}^{- 2}}

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Equivalent Annual Annuity Solution

Follow our step by step solution on how to calculate Equivalent Annual Annuity?

FIRST Step Consider the formula

C f = \frac{r \cdot (NPV)}{1 - {(1 + r)}^{- n}}

Next Step Substitute values of Variables

∴

C f = \frac{0.5 \cdot (700)}{1 - {(1 + 0.5)}^{- 2}}

Next Step Prepare to Evaluate

∴

C f = \frac{0.5 \cdot (700)}{1 - {(1 + 0.5)}^{- 2}}

LAST Step Evaluate

∴

C f = 630

Equivalent Annual Annuity Formula Elements

Variables

Equivalent Annuity Cashflow

Equivalent Annuity Cashflow refers to a series of equal cash flows that have the same present value as a given investment or series of cash flows.

Symbol: C_f

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Equivalent Annuity Cashflow

Rate per Period

The Rate per Period is the interest rate charged.

Symbol: r

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Rate per Period

Net Present Value (NPV)

Net Present Value (NPV) is a method of determining the current value of all future cash flows generated by a project after accounting for the initial capital investment.

Symbol: NPV

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Net Present Value (NPV)

Number of Periods

The Number of Periods is the periods on an annuity using the present value, periodic payment, and periodic rate.

Symbol: n

Measurement: NAUnit: Unitless

Note: Value can be positive or negative.

Formulas to find Number of Periods

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How to Evaluate Equivalent Annual Annuity?

Equivalent Annual Annuity evaluator uses Equivalent Annuity Cashflow = (Rate per Period*(Net Present Value (NPV)))/(1-(1+Rate per Period)^-Number of Periods) to evaluate the Equivalent Annuity Cashflow, The Equivalent Annual Annuity formula is defined as a financial metric used to evaluate and compare investment projects or opportunities with different cash flow profiles. Equivalent Annuity Cashflow is denoted by C_f symbol.

How to evaluate Equivalent Annual Annuity using this online evaluator? To use this online evaluator for Equivalent Annual Annuity, enter Rate per Period (r), Net Present Value (NPV) (NPV) & Number of Periods (n) and hit the calculate button.

FAQs on Equivalent Annual Annuity

What is the formula to find Equivalent Annual Annuity?

The formula of Equivalent Annual Annuity is expressed as Equivalent Annuity Cashflow = (Rate per Period*(Net Present Value (NPV)))/(1-(1+Rate per Period)^-Number of Periods). Here is an example- 630 = (0.5*(700))/(1-(1+0.5)^-2).

How to calculate Equivalent Annual Annuity?

With Rate per Period (r), Net Present Value (NPV) (NPV) & Number of Periods (n) we can find Equivalent Annual Annuity using the formula - Equivalent Annuity Cashflow = (Rate per Period*(Net Present Value (NPV)))/(1-(1+Rate per Period)^-Number of Periods).

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Equivalent Annual Annuity Formula

Equivalent Annual Annuity Example

Equivalent Annual Annuity Solution

Equivalent Annual Annuity Formula Elements

Other formulas in Investment category

How to Evaluate Equivalent Annual Annuity?

FAQs on Equivalent Annual Annuity

Variable Name