In the present-value break-even the EAC is used to:
A) determine the opportunity cost of 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.

Question

Quizplus · Accepted Answer

The EAC (Equivalent Annual Cost) is used to allocate the initial investment at its opportunity cost over the life of the project. This method helps in comparing the cost-effectiveness of projects with different lifespans by converting their costs into an equivalent annual amount.

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