What are the equivalent annual costs?

equivalent annual costs are the cost of ownership, maintenance and operation of the asset annually. This is important when deciding on the purchase of assets and budgeting. People determine the equivalent annual costs by looking at the basic price of the asset and the expected maintenance and operation costs and their distribution of the number of years can be expected that the asset will be in operation. For example, an asset expected to take five years, which costs $ 100,000 in the US (USD) and will cost $ 2,000 per year, will have an equal annual cost of $ 22,000.

It is usually calculated when people weigh a purchase. Knowledge of equivalent annual costs of one asset is useful because it will help people budget and decision -making, but in choosing more assets becomes particularly critical. The asset, which is very expensive, may have lower equivalent annual costs if the anapup has a longer life. A company that worries about costs in the near future can be attached to a cheaper assetCompanies that produce assets that could be considered the main purchases can usually provide information about how much maintenance is based on their experience and experience of other customers. People can also rely on registration of such products and consultants' estimates. For example, a company that is thinking about buying a new device may ask a real estate agent about the annual maintenance costs that they can expect, including taxes, insurance and costs to maintain equipment in good repair.

The lifetime of the asset is estimated on the basis of the performance of similar assets and the design of the asset. Experts can provide people with information about the expected lifetime of assets that they are considering buying, and people can also consider factors such as product guarantees. In addition, when they estimate equivalent annual costs, people must also think about the possibilities to spread and grow, which requires timely exchange of assets Pdilute by ending life.

While this concept usually comes in business, ordinary individuals can apply it to their own lives. Equivalent annual costs are something to think about buying cars, appliances and other major purchases.