2.5 - Capital Recovery Calculation
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Practice Questions
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Define Equivalent Annual Cost (EAC).
💡 Hint: What does EAC facilitate in decision-making?
What is a sunk cost?
💡 Hint: Think about costs from past decisions.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What is considered when estimating EAC?
💡 Hint: Think about everything that affects total costs.
Can sunk costs affect your future investment decisions?
💡 Hint: Consider what influence past costs have on present decisions.
1 more question available
Challenge Problems
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You have an old loader purchased for $45,000 with a salvage value of $8,000. Operating costs begin at $3,500 per year, and increase by $500 annually. Compute the EAC for year 1 and year 2. Determine in which year the loader should ideally be replaced based on your findings.
💡 Hint: Be sure you understand how operating costs are increasing over the years.
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