Explore BrainMass

Explore BrainMass

    equivalent annual cost over machine life calculation example

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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%.

    © BrainMass Inc. brainmass.com June 3, 2020, 10:07 pm ad1c9bdddf

    Solution Preview


    To determine the best choice, calculate the equivalent annual cost for each scenario:

    EAC(A) = $6,000/A5,15
    EAC(B) = ...

    Solution Summary

    Comparison of equivalent annual cost over machine life for two machines.