Practice Economic Life Of The Machine (3) - Equivalent Annual Cost Calculation

Practice: Economic Life of the Machine

Lesson 3Equivalent Annual Cost Calculation

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9 questions

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4 cards from this section. Quick, good the night before a test.
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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 does EAC stand for?
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What annual cost do we evaluate concerning equipment?
Question 2.
What is USCRF used for?
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Think about how we share costs over time.
3Question 3.
What does EAC help businesses to determine?
- Annual profit
- Cost variations
- Best time for replacement
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Focus on the effectiveness of cost management.
4Question 4.
True or False: Cumulative costs only account for initial purchase costs.
- True
- False
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Think about total expenditures over time.
Question 5.
A company purchased a machine for 2,500,000 rupees. It has annual maintenance costs of 150,000 rupees and a projected resale value of 500,000 rupees after 5 years. Calculate the EAC assuming an interest rate of 10%.
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First determine present values and apply them against the USCRF.
Question 6.
An organization is considering two machines. Machine A has an EAC of 1,000,000 rupees, while Machine B has 950,000 rupees. Discuss factors other than EAC that should influence a decision on which machine to purchase.
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Reflect on non-financial aspects that impact long-term value.

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