Equivalent annual cost
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.
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