1.5 - Calculating Equivalent Annual Cost for Year 1
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Practice Questions
Test your understanding with targeted questions
What is the formula to calculate Equivalent Annual Cost?
💡 Hint: Recall the terms used in the capital recovery calculation.
What is the purpose of calculating the present worth?
💡 Hint: Think about how time affects the value of money.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What does EAC stand for?
💡 Hint: Remember the terminology related to annualizing costs.
Is a lower EAC always better? True or False.
💡 Hint: Think about the implications of cost reduction.
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Challenge Problems
Push your limits with advanced challenges
A machine costs ₹5,000,000 with a resale value of ₹1,000,000 after 10 years. If the maintenance costs are ₹500,000 annually, calculate the EAC for year 1.
💡 Hint: Break down the costs into present worth and annual recovery.
Discuss how the change from 10% to 15% interest will influence EAC decisions over a 5-year period, using examples.
💡 Hint: Consider the financial impact of the increased rates on annual costs.
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