Practice Salvage Value Conversion to EAC for Challenger - 5.3 | 21. Introduction to Defender and Challenger Equipment | Construction Engineering & Management - Vol 1
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5.3 - Salvage Value Conversion to EAC for Challenger

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Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

What does EAC stand for?

💡 Hint: It's a term we use to compare costs over an asset's life.

Question 2

Easy

Why should sunk costs be ignored in our analysis?

💡 Hint: Think about the costs already spent.

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 primary purpose of calculating EAC?

  • To determine depreciation
  • To estimate annual costs of equipment
  • To find the salvage value

💡 Hint: Consider why you'd want to see costs in a yearly perspective.

Question 2

Sunk costs should influence your decision about keeping or replacing equipment.

  • True
  • False

💡 Hint: Think about whether these costs can be changed now.

Solve 1 more question and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

A company has two cranes: Crane A with an EAC of 7,00,000 and Crane B with an EAC of 5,50,000. If the interest rate doubles, calculate how the EAC might change for both cranes assuming similar cash flows.

💡 Hint: Consider how higher interest rates affect annuity values.

Question 2

Given the challenger has an initial cost of 27,50,000 and an operating cost of 90,000, evaluate how much more the annual cost would be if the salvage value drops to 10,00,000 after 5 years compared to the current salvage estimate of 12,00,000.

💡 Hint: Calculate the difference in EAC based on the changed salvage value.

Challenge and get performance evaluation