The Equivalent Annual Cost method allows comparison of the costs of equipment with unequal lives. If Quick-roll machine has an eleven year life, and an NPV of $2,100, while the Zip-roller machine has a seven year life and an NPV of $2,000. Which machine would you choose if the business is expected to continue and the discount rate for both is 14%?

Question

Quizplus · Accepted Answer

The Answer of The Equivalent Annual Cost method allows comparison of the costs of equipment with unequal lives. If Quick-roll machine has an eleven year life, and an NPV of $2,100, while the Zip-roller machine has a seven year life and an NPV of $2,000. Which machine would you choose if the business is expected to continue and the discount rate for both is 14%?

The Equivalent Annual Cost Method Allows Comparison of the Costs