The equivalent annual cost method is most useful in determining:
A)the annual operating cost of an idle machine that is currently owned by a firm.
B)the tax shield benefits of depreciation given the purchase of new assets for a project.
C)operating cash flows for cost-cutting projects of equal duration.
D)which one of two machines to acquire given equal machine lives but unequal machine costs.
E)which one of two machines to purchase when the machines are mutually exclusive,have differing lives,and will be replaced.

Question

Quizplus · Accepted Answer

The equivalent annual cost method is used to compare projects or assets with different lifespans by converting their costs into an equivalent annual amount, making it useful for deciding between mutually exclusive machines with differing lives.

The Equivalent Annual Cost Method Is Most Useful in Determining