SLIDE 19 13‐10‐2017 19
Equivalent Uniform Annual Cost (EUAC) Method
- Converts all the present and future
investments and cash flows into their equivalent uniform cash flows over the anticipated life of the project.
- Done by making use of the various interest
factors associated with engineering economy calculations.
- A minimum attractive rate‐of‐return (MARR),
20‐50, should be selected to decide whether a investment project should be funded.
Prepared by Dr.K.S.Badrinathan 37
Equivalent Uniform Annual Cost (EUAC) Method
- Total Investment = Rs.30 lacs
- Anticipated revenue = Rs.18 lacs/year
- Operating cost = Rs.6 lacs/year
- Service life of robot = 5 years
- MARR = 30%
- EUAC = ‐30,00,000 (A/P,30%,5) +18,00,000 ‐
6,00,000 = ‐30,00,000 (0.41058) + 12,00,000 = ‐31,740 Note: if EUAC is positive, then project can be funded
Prepared by Dr.K.S.Badrinathan 38