1.7 - Calculating Equivalent Annual Cost for Year 3 of O&M Cost
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Practice Questions
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What does EAC stand for?
💡 Hint: Look for the acronym meaning in basic definitions.
What is the first step to calculate the EAC from the purchase price?
💡 Hint: The acronym helps remember the two components needed for this calculation.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What does EAC stand for?
💡 Hint: Focus on the 'A' in EAC for annual.
Is the USCRF constant across different years?
💡 Hint: Remember how interest impacts future value.
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Challenge Problems
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A company has purchased equipment for 5,000,000 with a USCRF of 0.25. If the total O&M costs yearly are 500,000 but increase 5% each year, calculate the EAC after three years.
💡 Hint: Factor each year’s increase into the calculations.
If a piece of machinery is expected to last for 10 years with an initial purchase of 20,000,000 and a salvage value of 2,000,000 after that time, estimate the EAC using a 10% interest rate.
💡 Hint: Considering salvage values is crucial for accurate costing.
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