EAC - Estimated Annual Cost EAC accepts expenses as input. Expense start time can be supplied. By default expense starts at t=0. Expense can repeat. Expense repetition can be supplied. EAC computes NPV of expenses. Then, it calculates the EAC of the NPV at a given interest rate. EAC is applicable to comparing maintenance of machines with unequal lives. Example: Compare 2 machines A and B A: t=0 expense 15 t=1 expense 4 t=2 expense 4 t=3 expense 4 Interest rate = 10% NPV = 24.95 EAC = 10.03 B: t=0 expense 10 t=1 expense 6 t=2 expense 6 Interest rate - 10% NPV = 20.41 EAC = 11.76 Which machine is better? Machine A is better than machine B due to lower EAC.
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Developed by Business Compass LLC
Day of release: 2010-06-26
Recommended age: 4+