Equivalent Annual Cost (EAC) Calculator

Calculate Equivalent Annual Cost





Formula

The formula to calculate the equivalent annual cost is:

\[ EAC = \frac{AP \times DR}{1 - (1 + DR)^{-n}} \]

Where:

What is Equivalent Annual Cost (EAC)?

Equivalent annual cost (EAC) is a measure of the true cost of owning an asset over its lifetime. It allows for the comparison of different assets with varying lifespans and costs by converting their total costs into an equivalent annual amount.

Example Calculation

Let's assume the following values:

Using the formula to calculate the equivalent annual cost:

\[ EAC = \frac{10000 \times 0.05}{1 - (1 + 0.05)^{-5}} \approx 2309.36 $/year \]

The equivalent annual cost is approximately $2309.36 per year.