Practice Conversion To Present Worth Factor For Resale Value (1.9) - Equivalent Annual Cost Calculation

Practice: Conversion to Present Worth Factor for Resale Value

Lesson 1.9Equivalent Annual Cost Calculation

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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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Quiz
2 questions · about 1 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 what each letter represents.
Question 2.
What is the purpose of calculating a present worth factor?
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Consider why present value is critical in financial decision-making.
3Question 3.
What does EAC stand for?
- Equivalent Asset Cost
- Equivalent Annual Cost
- Effective Annual Cost
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Consider the yearly nature of costs.
4Question 4.
True or False: The present worth factor only applies to costs encountered in the present.
- True
- False
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Think about the purpose of present worth factors.
Question 5.
A new machine costs 5,000,000 rupees, and it has an expected life of 8 years with a salvage value of 1,000,000. What is the EAC at an interest rate of 10%?
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Consider both purchase cost and disposal value during the calculation.
Question 6.
Calculate the total EAC for two machines: Machine A costs 3,000,000 rupees with no salvage value, while Machine B costs 3,500,000 rupees with a salvage value of 500,000, both with a lifespan of 5 years and an interest rate of 12%. Which is better?
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Account for both purchase price and estimated salvage values.

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