Equivalent annual cost
Also found in: Medical, Acronyms, Wikipedia.
Equivalent annual cost
The cost per year of owning an asset over its entire life.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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.
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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved