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When calculating EAC ,we take the lower NPV and divide by the annuity factor. so which one is the lower between these:
-200,-90,-78,-16 and between these -102,-147,-56,18? EXAMPLE, RIDAG CO,QUESTION (b)
please help it gives problem.I am sorry, but I don’t understand your question!
If you are talking about the replacement problem, then we for each replacement period we calculate the NPV and then divide by the annuity factor for the replacement period to get the equivalent annual cost.
The best replacement period is the one with the lowest equivalent annual cost.You refer to an example called Ridag. Please tell me where this question is and I will try to help more.
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