The Equivalent Annual Cost Method Allows Comparison of the Costs

question 42

Essay

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%?

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Definitions:

Moral Development

The process through which an individual learns to distinguish right from wrong, and to develop values and ethics.

Social Order

The set of linked social structures, practices, and norms that maintain and enforce certain patterns of relating and behaving within a society.

Conventional

Pertains to methods, behaviors, or ideas that are traditional or widely accepted within a society.

Babble

The production of speech-like but meaningless sounds, especially in infants as a precursor to language development.