Practice Calculating Equivalent Annual Cost For Year 1 (1.5) - Equivalent Annual Cost Calculation

Practice: Calculating Equivalent Annual Cost for Year 1

Lesson 1.5Equivalent Annual Cost Calculation

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9 questions

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3 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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Quiz
3 questions · about 2 min · pass mark 70%. Hints available.
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6 sample questions

Question 1.
What is the formula to calculate Equivalent Annual Cost?
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Recall the terms used in the capital recovery calculation.
Question 2.
What is the purpose of calculating the present worth?
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Think about how time affects the value of money.
3Question 3.
What does EAC stand for?
- Estimated Average Cost
- Equivalent Annual Cost
- Effective Annual Cost
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Remember the terminology related to annualizing costs.
4Question 4.
Is a lower EAC always better? True or False.
- True
- False
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Think about the implications of cost reduction.
Question 5.
A machine costs ₹5,000,000 with a resale value of ₹1,000,000 after 10 years. If the maintenance costs are ₹500,000 annually, calculate the EAC for year 1.
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Break down the costs into present worth and annual recovery.
Question 6.
Discuss how the change from 10% to 15% interest will influence EAC decisions over a 5-year period, using examples.
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Consider the financial impact of the increased rates on annual costs.

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