2. Total Cost Calculation

Try these first

1. 1.

   What does EAC stand for?

   Hint

   It expresses costs on an annual basis.

2. 2.

   Calculate the EAC for a purchase price of 3,000,000 using a factor of 0.5.

   Hint

   Multiply the price by the provided factor.

3. 3.

   What does EAC stand for?

   • Effective Annual Cost
   • Equalized Asset Cost
   • Equivalent Annual Cost

   Hint

   Consider the definition of EAC discussed.

4. 4.

   True or False: The salvage value can decrease total costs.

   • True
   • False

   Hint

   Think about how cash inflows affect overall financials.

5. 5.

   If a machine's EAC for purchase is 50,000, for operating is 15,000, and salvage at 10,000, calculate its total yearly cost.

   Hint

   Add EAC for purchase and operations and subtract salvage.

6. 6.

   Scenario: You have an operating cost that changes yearly by 5%. If the initial cost is 10,000, what will it be in Year 3?

   Hint

   Remember to apply the percentage increase for each subsequent year.