Research on the Application of EAA and EAC

DOI

10.2991/978-94-6463-042-8_112How to use a DOI?

Keywords

the optimal machine life; equivalent annual annuity; equivalent annual cost; net present value; investment

Abstract

When there are multiple investment projects, those who have the opportunity will usually choose the investment through calculating the net present value(NPV), and if an investment has the biggest net present value, then it will be the optimal investment. When the life of investments is the same, we can utilize net present value to determine the best machine life. However, when the machine has different ages, it is impossible to make investment choices by calculating net present value. The study found that when there are projects with different investment years, it can be calculated by the equivalent annuity method and the investment value annuity method. Therefore, the main purpose of this article is to introduce the concepts of equivalent annual annuity(EAA)and equivalent annual cost(EAC), and to study the use of these in real life, all walks of life and various industries. There is still a lot of white space, and the actual use is very frequent. Therefore, the use of equivalent annual cost in real life will be more extensive. When there is a new project, the cost between the new and old projects should be evaluated by calculating the equivalent annual cost, so as to make frequent choices. Both EAA and EAC are used to evaluate various projects with different investment years or service lives. EAA is calculated from the perspective of profitability, while EAC is considered from the perspective of cost. Research on these two will not only be of great help in the field of investment, but also will be a great progress in project evaluation and research and development in all walks of life.

Copyright

© 2023 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Jiaxin Cai
PY  - 2022
DA  - 2022/12/29
TI  - Research on the Application of EAA and EAC
BT  - Proceedings of the 2022 International Conference on mathematical statistics and economic analysis (MSEA 2022)
PB  - Atlantis Press
SP  - 787
EP  - 793
SN  - 2352-538X
UR  - https://doi.org/10.2991/978-94-6463-042-8_112
DO  - 10.2991/978-94-6463-042-8_112
ID  - Cai2022
ER  -