Practice Calculating The Equivalent Annual Cost For Year 3 (1.1) - Equivalent Annual Cost Calculation

Practice: Calculating the Equivalent Annual Cost for Year 3

Lesson 1.1Equivalent Annual Cost Calculation

Practise this section

9 questions

Flashcard drill
4 cards from this section. Quick, good the night before a test.
Exercise
6 questions · about 4 min · pass mark 70%. Hints available.
Sign up to start the exercise
Quiz
3 questions · about 2 min · pass mark 70%. Hints available.
Sign up to start the quiz

6 sample questions

Question 1.
What is the purchase price used for calculating EAC?
Show hintHide hint
Look for the initial cost in the problem statement.
Question 2.
What is the USCRF for year 3 at an interest of 15%?
Show hintHide hint
Check how USCRF is calculated or given in the lesson.
3Question 3.
What does EAC represent in financial analysis?
- Annual cost of an asset
- Total purchase price
- Total maintenance cost
Show hintHide hint
Think about what expenses are included in EAC.
4Question 4.
Is the USCRF constant for all years?
- True
- False
Show hintHide hint
Recall how we determine USCRF for different years.
Question 5.
A corporation is evaluating an asset purchased for 10,000,000 rupees with an expected life of 5 years and a salvage value of 2,000,000 rupees. If the operating and maintenance costs are 1,000,000 per year, find the EAC.
Show hintHide hint
Find separate EAC for purchase and O&M, then combine.
Question 6.
Consider a project with revenue inflow of 500,000 rupees, a purchase cost of 3,000,000 rupees, yearly operating costs of 150,000 with no salvage value. Calculate EAC.
Show hintHide hint
Relevance of salvage value needs careful handling in EAC context.

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