Practice New Estimates and Remaining Life Considerations - 4.3 | 20. Equivalent Annual Cost Calculation | Construction Engineering & Management - Vol 1
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Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

What does EAC stand for?

💡 Hint: Think about yearly financial metrics.

Question 2

Easy

What is the formula for calculating EAC?

💡 Hint: Consider how we break down total costs.

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 does EAC help determine?

  • Annualized costs
  • Monthly costs
  • Total production cost

💡 Hint: Think about yearly payments.

Question 2

Is resale value considered a cash outflow?

  • True
  • False

💡 Hint: Consider how we account cash inflows and costs.

Solve and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

Calculate the total EAC for a piece of machinery with a purchase price of 8,000,000, an expected annual operating cost of 200,000, a salvage value of 1,000,000, with a useful life of 7 years at an annual interest rate of 5%.

💡 Hint: Factor in USCRF calculations and do adjustments for salvage.

Question 2

Discuss how a change in salvage value from 1,500,000 to 2,000,000 alters the economic analysis and decision on equipment replacement.

💡 Hint: Assess the financial impact through cash flow implications.

Challenge and get performance evaluation