In the present value break-even,the EAC is used to:
A)determine the salvage value of the initial fixed asset investment.
B)allocate depreciation over the life of the project.
C)allocate the initial investment at its opportunity cost over the life of the project.
D)determine the contribution margin to fixed costs ratio.
E)allocate the opportunity and erosion costs over the life of the project.

Question

Quizplus · Accepted Answer

The EAC (Equivalent Annual Cost) is used in present value break-even analysis to allocate the initial investment at its opportunity cost over the life of the project. This is done to determine the annual cost of the project, which is then used to calculate the break-even point in terms of present value. The other options listed are not related to the use of EAC in present value break-even analysis.

In the Present Value Break-Even,the EAC Is Used To