Construction Engineering & Management - Vol 1 | 20. Equivalent Annual Cost Calculation by Abraham | Learn Smarter
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Knowledge
20. Equivalent Annual Cost Calculation

The chapter focuses on the calculation of Equivalent Annual Costs (EAC) associated with operating and maintenance costs, salvage value, and purchase price of equipment. It provides step-by-step methodologies to convert various future cash flows into present values, ultimately assisting in the economic life analysis of machinery. The tracking of costs throughout the machine's lifecycle helps determine optimal replacement timings.

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Sections

  • 1

    Equivalent Annual Cost Calculation

    This section details the calculation of equivalent annual cost (EAC) for various costs associated with machinery, including purchase, operating, maintenance, and salvage values.

    Learning Practice

  • 1.1

    Calculating The Equivalent Annual Cost For Year 3

    This section covers the process for calculating the equivalent annual cost (EAC) for the third year considering purchase, operating, and maintenance costs.

    Learning Practice

  • 1.2

    Finding The Equivalent Annual Cost Of Operating And Maintenance Cost

    This section explains how to calculate the equivalent annual cost (EAC) for operating and maintenance costs using present worth factors and uniform series capital recovery factors.

    Learning Practice

  • 1.3

    Present Worth Factor Calculation

    This section covers the process of calculating present worth factors and equivalent annual costs for various financial scenarios.

    Learning Practice

  • 1.4

    Present Worth Of Operating And Maintenance Cost Calculation

    This section outlines the method of calculating the equivalent annual cost for operating and maintenance costs using present worth factors.

    Learning Practice

  • 1.5

    Calculating Equivalent Annual Cost For Year 1

    The section outlines the method to calculate the Equivalent Annual Cost (EAC) for the first year of a purchase price, incorporating operating and maintenance costs.

    Learning Practice

  • 1.6

    Calculating Equivalent Annual Cost For Year 2

    This section explains how to calculate the equivalent annual cost (EAC) for year 2, covering both the purchase price as well as operational and maintenance costs.

    Learning Practice

  • 1.7

    Calculating Equivalent Annual Cost For Year 3 Of O&m Cost

    This section focuses on the calculation of the equivalent annual cost for operating and maintenance (O&M) expenses for year 3, alongside the purchase price and salvage value.

    Learning Practice

  • 1.8

    Calculating Equivalent Annual Cost Of Resale Value

    This section details the process of calculating the equivalent annual cost (EAC) associated with the resale value of an asset, integrating aspects such as operating and maintenance costs.

    Learning Practice

  • 1.9

    Conversion To Present Worth Factor For Resale Value

    This section explores the process of calculating equivalent annual costs based on present worth factors, specifically focusing on resale values and operating costs.

    Learning Practice

  • 2

    Total Cost Calculation

    This section discusses how to calculate the equivalent annual cost (EAC) for a machine, factoring in purchase price, operating and maintenance costs, and salvage value.

    Learning Practice

  • 2.1

    Adding Purchase Price And Operating Costs

    This section covers the calculation of equivalent annual costs (EAC) for purchase price and operating costs of a machine.

    Learning Practice

  • 2.2

    Understanding Total Equivalent Cost

    This section focuses on calculating the equivalent annual costs associated with the purchase price, operating and maintenance costs, and resale value to determine the total equivalent cost for decision-making in financial management.

    Learning Practice

  • 3

    Economic Life Of The Machine

    This section focuses on calculating the equivalent annual costs associated with the purchase, operating, and maintenance costs of a machine over its lifespan.

    Learning Practice

  • 3.1

    Determining The Economic Life Of The Machine

    This section discusses how to calculate the equivalent annual cost of machines by determining their purchase price and operating/maintenance costs.

    Learning Practice

  • 4

    Replacement Analysis Problem

    This section discusses the process of calculating the Equivalent Annual Cost (EAC) for a given purchase and its operating costs over time, leading to informed replacement analysis decisions.

    Learning Practice

  • 4.1

    Defender Vs. Challenger Overview

    This section introduces the concept of determining the economic life of machinery through the equivalent annual cost approach, focusing on the defender and the challenger.

    Learning Practice

  • 4.2

    Current Value And Sunk Cost Analysis

    This section covers the calculations involved in determining equivalent annual costs and the implications of sunk costs in financial decision-making.

    Learning Practice

  • 4.3

    New Estimates And Remaining Life Considerations

    This section discusses the calculation of equivalent annual costs for various expenses related to equipment, including initial purchase, operating, maintenance costs, and estimates for resale values.

    Learning Practice

References

8 b.pdf

Class Notes

Memorization

What we have learnt

  • Understanding of Equivalent...
  • Methods for calculating pre...
  • The importance of economic ...

Final Test

Revision Tests