KEVOS® MAKEOS · Money
Equivalent Annual Cost Comparison
Which of two machines or options has the lower equivalent uniform annual cost?
Equivalent uniform annual cost (EUAC) and capitalised cost of two alternatives with different first costs, running costs, salvage values and lives, at a discount rate.
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How this tool works
Inputs, units and where to find them
| Input | Unit | Typical source |
|---|---|---|
| Discount rate | % | Your organisation’s approved discount rate (real or nominal, consistent with the costs). |
| Option A | ||
| First cost | AUD | Installed cost of option A. |
| Annual operating cost | AUD/yr | Yearly running cost of A (energy, maintenance, labour). |
| Salvage value | AUD | Value of A at the end of its life. |
| Life | years | Life of A in years. |
| Option B | ||
| First cost | AUD | Installed cost of option B. |
| Annual operating cost | AUD/yr | Yearly running cost of B. |
| Salvage value | AUD | Value of B at the end of its life. |
| Life | years | Life of B in years. |
Method and formulas
- Capital recovery A/P = i(1 + i)ⁿ ÷ ((1 + i)ⁿ − 1); sinking fund A/F = i ÷ ((1 + i)ⁿ − 1).
- EUAC = P × (A/P) + annual cost − S × (A/F).
- Capitalised cost = EUAC ÷ i (perpetual like-for-like replacement).
- Example: EUAC is $23,671 for A and $19,232 for B at 8%.
Limitations
- Assumes each option is repeated like-for-like at the end of its life, with constant costs.
- Taxes, inflation and financing are not modelled unless built into the inputs.
- Example values are illustrations. Replace them with values for your actual task.
Typical uses
- Compare machines with different lives
- Decide between repair and replacement
- Compare a cheap short-life option with a durable one
Who it is for
- Engineering managers
- Project engineers
- Finance and business analysts
What you get
- EUAC of each option
- Annual saving of the cheaper option
- Capitalised cost (perpetual service)
Interpreting the result
- Choose the lower EUAC if both options meet the technical need equally.
References
- Machinery’s Handbook, 29th edition (Industrial Press, 2012), printed pp. 134–146. Topic reference; no source tables or recommended settings are reproduced.
WORKOS tools are screening and decision-support utilities. Verify important financial, engineering, safety, legal or operational decisions using appropriate professional standards and your organisation’s approved data.
