1.6. Calculating Equivalent Annual Cost for Year 2

Try these first

1. 1.

   What does EAC stand for?

   Hint

   It's an acronym used in project management.

2. 2.

   If the purchase price is Rs. 4,000,000 and the USCRF is 0.5, what is the EAC?

   Hint

   Multiply the purchase price by the uniform series capital recovery factor.

3. 3.

   What does EAC stand for?

   • Equivalent Annual Cost
   • Estimated Average Cost
   • Equal Annual Contribution

   Hint

   Think about the term that speaks about projects' yearly cost.

4. 4.

   True or False: The USCRF is used to calculate future costs.

   • True
   • False

   Hint

   Reflect on whether it applies to future or current costs.

5. 5.

   Given a purchase price of Rs. 5,000,000 and a USCRF of 0.3, calculate the EAC for Year Four. Now consider yearly operating costs of Rs. 600,000 with a constant salvage value of Rs. 100,000.

   Hint

   Carefully include all variables during your calculations.

6. 6.

   If the EAC for a purchase price is Rs. 3,000,000 and operating costs are Rs. 1,000,000, what would be the revised total if salvage value increases to Rs. 200,000?

   Hint

   Keep track of how each component impacts the overall total.