2.3 - Calculating EAC for Purchase Price
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Practice Questions
Test your understanding with targeted questions
What does EAC stand for?
💡 Hint: Think about the annual cost of owning equipment.
Why is salvage value important in EAC calculations?
💡 Hint: Consider how end-of-life sells impact overall ownership costs.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What does the acronym EAC represent?
💡 Hint: Reflect on annual costs related to equipment management.
Is salvage value considered when calculating total costs for EAC?
💡 Hint: Think about the future resale and its financial retrieval.
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Challenge Problems
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A company purchases a machine for $45,000, expects a salvage value of $8,000, and projects annual operating costs to rise from $1,500 to $3,000 over 6 years. Calculate the economic life of the machine using EAC.
💡 Hint: Take multiple years of operation into account along with the salvage value.
If a construction firm has two machines with different purchase prices of $50,000 and $40,000, both with similar operating costs but differing salvage values, explain which machine they should choose based on EAC principles.
💡 Hint: Focus on the whole lifecycle, including sale prices, while weighing initial costs against efficiencies.
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