3.1 - Determining the Economic Life of the Machine
Enroll to start learning
You’ve not yet enrolled in this course. Please enroll for free to listen to audio lessons, classroom podcasts and take practice test.
Practice Questions
Test your understanding with targeted questions
What is the definition of Equivalent Annual Cost (EAC)?
💡 Hint: Think about how it reflects costs over time.
How do we convert future costs to present worth?
💡 Hint: Consider the formula for calculating present value.
4 more questions available
Interactive Quizzes
Quick quizzes to reinforce your learning
What is the formula to calculate EAC?
💡 Hint: Consider which variables you are using in this calculation.
True or False: The salvage value increases the total cost.
💡 Hint: Think about how salvage works in financial assessments.
2 more questions available
Challenge Problems
Push your limits with advanced challenges
A company has a machine worth 5,000,000 Rs. that incurs annual O&M costs of 300,000 Rs. at an interest rate of 10%. Calculate the total EAC for 3 years including a salvage value of 1,000,000 Rs.
💡 Hint: Break down the problem into steps focusing on each cost component.
Discuss a scenario where opting for a replacement before the machine’s economic life ends could save costs. Explain your rationale using EAC.
💡 Hint: Identify savings categories that outweigh the benefits of keeping the older machine.
Get performance evaluation
Reference links
Supplementary resources to enhance your learning experience.