Practice Calculating Eac For Purchase Price (2.3) - Equipment Life and Replacement Analysis (Part 3)

Practice: Calculating EAC for Purchase Price

Lesson 2.3Equipment Life and Replacement Analysis (Part 3)

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8 questions

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2 cards from this section. Quick, good the night before a test.
Exercise
6 questions · about 4 min · pass mark 70%. Hints available.
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6 sample questions

Question 1.
What does EAC stand for?
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Think about the annual cost of owning equipment.
Question 2.
Why is salvage value important in EAC calculations?
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Consider how end-of-life sells impact overall ownership costs.
3Question 3.
What does the acronym EAC represent?
- Expected Annual Cost
- Equivalent Annual Cost
- Estimated Average Cost
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Reflect on annual costs related to equipment management.
4Question 4.
Is salvage value considered when calculating total costs for EAC?
- True
- False
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Think about the future resale and its financial retrieval.
Question 5.
A company purchases a machine for $45,000, expects a salvage value of $8,000, and projects annual operating costs to rise from $1,500 to $3,000 over 6 years. Calculate the economic life of the machine using EAC.
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Take multiple years of operation into account along with the salvage value.
Question 6.
If a construction firm has two machines with different purchase prices of $50,000 and $40,000, both with similar operating costs but differing salvage values, explain which machine they should choose based on EAC principles.
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Focus on the whole lifecycle, including sale prices, while weighing initial costs against efficiencies.

4 more questions in this section. Enroll free to practise them all.