Equivalent Annual Cost Calculator
EAC Analysis
Equivalent Annual Cost: $0.00
Present Value of Costs: $0.00
Annual Capital Recovery: $0.00
Cost per Day: $0.00
Understanding Equivalent Annual Cost (EAC)
Equivalent Annual Cost (EAC) is a financial metric that converts the total cost of ownership of an asset or project into an equivalent annual amount, making it easier to compare options with different lifespans.
Key Components
Cost Elements
- Initial investment
- Operating costs
- Maintenance expenses
- Salvage value
- Time value of money
Applications
- Equipment comparison
- Project evaluation
- Investment analysis
- Asset replacement
- Capital budgeting
Decision Making
- Cost comparison
- Investment timing
- Resource allocation
- Budget planning
- Risk assessment
Calculation Factors
- Discount rate selection
- Project lifespan
- Cost estimation
- Value depreciation
- Market conditions
Frequently Asked Questions
What is EAC used for?
EAC helps compare investments or projects with different lifespans by converting their costs into equivalent annual amounts.
How is discount rate determined?
The discount rate typically reflects the company's cost of capital or required return on investment, usually ranging from 5% to 15%.
Why consider salvage value?
Salvage value affects the total cost of ownership by reducing the net cost through the asset's residual value at the end of its life.
Financial Disclaimer
This calculator provides estimates based on input values. Actual costs may vary. Consult with financial professionals for investment decisions.