Equivalent annual cost


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Equivalent annual cost

The cost per year of owning an asset over its entire life.

Equivalent Annual Cost

The cost of an asset over the time it is held, expressed in annualized terms. It is calculated as:

EAC = (Price + Discount Rate) / (1 - (1 + Discount Rate)-Years Held)

The EAC may be compared to the revenue that the asset produces in a year to determine whether acquiring the asset is cost effective.
References in periodicals archive ?
This work utilizes the equivalent annual cost (EAC) method because subsystems in both sorption systems and the solar PV system have unequal useful life spans.
To overcome this difficulty, the concept of equivalent annual cost (EAC) has been introduced, which is a variant of the EACF methodology.
The objective of this model is to minimize the equivalent annual cost (EAC) of meeting all the building cluster loads and additional imposed constraints.
The total present worth and the equivalent annual costs calculated from equations in the article are used to compare the economics of the alternative processes and major process components in order to arrange for project funding and to obtain the design service.