Equivalent Annual Cost (EAC) Calculator

May 2024 ยท 2 minute read
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Given Item A:
Investment cost of $
a lifetime of periods
Maintenance cost = $

Given Item B:
Investment cost of $
a lifetime of periods
Maintenance cost = $

Cost of capital = %
Calculate the Equivalent Annual Cost

Calculate v:
v  =  1
  1 + Cost of Capital

v  =  1
  1 + 0

v  =  1
  1

v = 1

Calculate Discount Factor for Item 1:
a|0  =  (1 - vAsset Lifetime)
  Cost of Capital

a|0  =  (1 - 1)
  0

a|0  =  (1 - 1)
  0

a|0  =  0
  0

a|0 = NAN

Excel or Google Sheets formula:
Excel or Google Sheets formula:=PV(0,,-1)
Calculate Discounted Investment 1:
DI 1  =  Investment Cost
  a|0

DI 1  =  $
  NAN

DI 1 = $nan

Calculate EAC for Item 1

EAC1 = DI 1 + Maintenance Cost

EAC1 = $nan + $

EAC1 = $nan

Calculate Discount Factor for Item 2:
a|0  =  (1 - vAsset Lifetime)
  Cost of Capital

a|0  =  (1 - 1)
  0

a|0  =  (1 - 1)
  0

a|0  =  0
  0

a|0 = NAN

Excel or Google Sheets formula:
Excel or Google Sheets formula:=PV(0,,-1)
Calculate Discounted Investment 2:
DI 2  =  Investment Cost
  a|0

DI 2  =  $
  NAN

DI 2 = $nan

Calculate EAC for Item 2

EAC2 = DI 2 + Maintenance Cost

EAC2 = $nan + $

EAC2 = $nan

Determine Conclusion:

We invest in Machine 2 since it has the lower EAC

You have 1 free calculations remaining


What is the Answer?

We invest in Machine 2 since it has the lower EAC

How does the Equivalent Annual Cost (EAC) Calculator work?

Free Equivalent Annual Cost (EAC) Calculator - Given 2 Items/machines with an Investment Cost, expected lifetime, and maintenance cost, this will calculate the EAC for each Item/machine as well as draw a conclusion on which project to invest in.
This calculator has 7 inputs.

What 1 formula is used for the Equivalent Annual Cost (EAC) Calculator?

v = 1 / (1 + Cost of Capital)
Discount Factor = (1 - vn) / Cost of Capital

For more math formulas, check out our Formula Dossier

What 4 concepts are covered in the Equivalent Annual Cost (EAC) Calculator?

annuityA stream of paymentsequivalent annual cost (eac)investmentan asset or item acquired with the goal of generating income or appreciation. present valuethe value in the present of a sum of money, in contrast to some future value it will have when it has been invested at compound interest.
PV = FV/(1 + i)n
where I is the interest rate per period, PV = Present Value, and FV = Future Value

Equivalent Annual Cost (EAC) Calculator Video


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