1.2 - Finding the Equivalent Annual Cost of Operating and Maintenance Cost
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Practice Questions
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Define Equivalent Annual Cost (EAC).
💡 Hint: Think about how costs can accumulate.
What does Present Worth represent?
💡 Hint: It's all about today versus tomorrow.
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Interactive Quizzes
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What is Equivalent Annual Cost?
💡 Hint: Focus on the word 'annual'.
Is Present Worth the same as future value?
💡 Hint: Remember, one is today’s value, the other is future value.
1 more question available
Challenge Problems
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A company has annual costs for maintenance as follows: Year 1: 50,000, Year 2: 70,000, and Year 3: 90,000. Using the respective USCRFs of 1.05, and 0.95, calculate the EAC over three years.
💡 Hint: Each year's costs must be discounted based on its timing.
Discuss how the potential future increase in interest rates may affect decisions on retaining or replacing machinery based on EAC.
💡 Hint: Think about the direct impact on borrowing or investment worth.
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