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    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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    https://brainmass.com/business/annuity/equivalent-annual-cost-over-machine-life-calculation-example-216083

    Solution Preview

    Response:

    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.

    $2.19

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