Question

The annual annuity stream of payments that has the same present value as a project's costs is referred to as which one of the following?
a. equivalent annual cost.
b. erosion cost.
c. opportunity costs.
d. yearly incremental costs.
e. sunk costs.

Answer 1

Answer:

a. equivalent annual cost.

Explanation:

In the case when the annuity payment stream on annually basis contains the similar present value as compared with the initial investment of the project so this we called as equivalent annual cost

It is term as equivalent to devlop a cash flow in a cash flows stream via project life

Therefore the option a is correct

And, the rest of the options are incorrect