equivalent annual cost over machine life calculation example
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Two machines, A and B, which perform the same functions, have the following costs and lives.
Type PV Costs Life
machine A $6000 5
machine B $8000 7
Which machine would you choose? Justify your decision. The two machines are mutually exclusive and the cost of capital is 15%.
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Solution Summary
Comparison of equivalent annual cost over machine life for two machines.
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Response:
To determine the best choice, calculate the equivalent annual cost for each scenario:
EAC(A) = $6,000/A5,15
EAC(B) = ...
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