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# Equivalent Annual Cost and Minimum Attractive Rate of Return

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Compare the equivalent annual costs for 2 pumps. The minimum attractive rate of return is 12%.

First cost of PUMP A is \$8000
First cost of PUMP B is \$6000

Salvage of PUMP A is zero
Salvage of PUMP B is zero

Life span of PUMP A is 8 years
Life span of PUMP B is 8 years

Annual repair costs of PUMP A is \$500
Annual repair costs of PUMP B is \$800

Annual operating costs of PUMP A is \$1500
Annual operating costs of PUMP B is \$1800

Use equivalent annual cost method.

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Compare the equivalent annual costs for 2 pumps. The minimum attractive rate of return is 12%.

First cost of PUMP A is \$8000
First cost of PUMP B is \$6000

Salvage of PUMP A is zero
Salvage of PUMP B is zero

Life span of PUMP A is 8 years
Life span of PUMP B is 8 years

Annual repair costs of PUMP A is \$500
Annual repair costs of PUMP B is \$800

Annual operating costs of PUMP A is \$1500
Annual operating costs of PUMP B is \$1800

Use equivalent annual cost method