Practice Understanding Total Equivalent Cost (2.2) - Equivalent Annual Cost Calculation

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8 questions

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Exercise
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6 sample questions

Question 1.
What is the formula for calculating EAC?
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Remember, USCRF is used to spread the cost over the years.
Question 2.
How do you calculate Present Worth?
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Focus on the future cash flow and the relevant factor.
3Question 3.
What does EAC stand for?
- Equivalent Active Cost
- Equivalent Annual Cost
- Equally Allocated Cost
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Think about the purpose of annual cost in financial assessments.
4Question 4.
True or False: The present worth factor is used to convert future cash flows to their present value.
- True
- False
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Consider how future value relates to current value.
Question 5.
A company invests 8,000,000 for 4 years with a 12% interest rate. What is the annual cost?
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Make sure to get the correct USCRF value from financial tables.
Question 6.
If your machine has an O&M cost of 150,000 annually and a salvage value of 1,500,000 after 5 years, what is the total cost adjusted to present worth?
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Think through each cash flow step by step.

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