Equivalent Annual Cost Alternatives
EAC compares alternatives by converting each cost stream into an equivalent annual amount.
EAC compares alternatives by converting each cost stream into an equivalent annual amount.
A government center compares standard construction and energy-efficient construction for a 40-year life at 10%. Which alternative has lower EAC?
Standard construction: $EAC=250,536+10,226+10,000=270,762$.
Energy-efficient construction: $EAC=255,649+8,692+6,000=270,341$.
Final answer: choose energy-efficient construction because its EAC is lower.
A generating unit has a 2-year warranty. Repair costs of $3,500 per year begin after warranty and continue through a 15-year life. At 7%, find EAC for repair costs.
Convert the deferred repair series to future worth, then annualize over 15 years.
Final answer: $2,805 per year.