Equivalent Annual Cost
Subject: Finance | Topics:

Equivalent Annual Cost (EAC) is the annual cost associated with owning an asset over its whole life. Equivalent annual cost is normally used by firms for capital having a budget decisions. EAC is normally used as a decision making tool with capital budgeting when comparing investment projects associated with unequal lifespans. On the other hand, the projects being compared should have equal risk: normally, EAC must not provide.

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