7.2. Reference Textbooks

Try these first

1. 1.

   What does EAC stand for?

   Hint

   The acronym you use when discussing annual costs.

2. 2.

   Name the two types of equipment discussed.

   Hint

   One is what you currently have.

3. 3.

   What does EAC stand for?

   • Estimated Average Cost
   • Equivalent Annual Cost
   • Expected Annual Cost

   Hint

   Think about annual costs related to equipment.

4. 4.

   True or False: Sunk costs should be considered in replacement analysis.

   • True
   • False

   Hint

   Remember what has already been spent.

5. 5.

   Consider an equipment with an initial cost of 30,00,000 and a salvage value of 10,00,000 after 5 years with a 10% interest rate. Discuss the equivalency of costs if operating costs are projected at 2,00,000 per year.

   Hint

   Understand the impact of costs on long-term ownership.

6. 6.

   Given the following information, analyze which equipment to retain: Defender EAC is 650,000, Challenger EAC is 610,000, but Challenger has higher initial repair costs. Discuss implications.

   Hint

   Consider both short term and long term costs.