Practice Determining the Economic Life of the Machine - 3.1 | 20. Equivalent Annual Cost Calculation | Construction Engineering & Management - Vol 1
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3.1 - Determining the Economic Life of the Machine

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Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

What is the definition of Equivalent Annual Cost (EAC)?

💡 Hint: Think about how it reflects costs over time.

Question 2

Easy

How do we convert future costs to present worth?

💡 Hint: Consider the formula for calculating present value.

Practice 4 more questions and get performance evaluation

Interactive Quizzes

Engage in quick quizzes to reinforce what you've learned and check your comprehension.

Question 1

What is the formula to calculate EAC?

  • EAC = USCRF × Purchase Price
  • EAC = Purchase Price / USCRF
  • EAC = Purchase Price + Operating Costs

💡 Hint: Consider which variables you are using in this calculation.

Question 2

True or False: The salvage value increases the total cost.

  • True
  • False

💡 Hint: Think about how salvage works in financial assessments.

Solve 2 more questions and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

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.

Question 2

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.

Challenge and get performance evaluation