Equivalent Annual Cost Calculator

Work out equivalent annual cost instantly with clear inputs, formula shown and shareable results.

About Equivalent Annual Cost Calculator

Equivalent annual cost spreads the whole-life cost of an asset — purchase plus running costs — into a level yearly figure. It is the correct way to compare options with different lives, because a cheap short-lived asset must be replaced sooner.

Formula

EAC

EAC = PV(total costs) × CRF; CRF = 1 / [(1-(1+r)^-n)/r]

r: Discount rate
n: Life in years

Worked example

With the default values below, Equivalent Annual Cost Calculator returns Equivalent Annual Cost of $66,708.85. Change any input above and every figure here is recalculated in your browser.

Inputs used

Purchase Costminimum 0: 300,000
Annual Running Costminimum 0: 22,000
Discount Rateaccepts 0–100 %: 8 %
Asset Life In Yearsaccepts 1–60: 10

Results

Equivalent Annual Cost: $66,708.85
Present Value Of All Costs: $447,621.79
Capital Charge Per Year: $44,708.85
Running Cost Per Year: $22,000.00

Step by step

1Values used
2EAC
3Equivalent Annual Cost= 66,708.85
4Present Value Of All Costs= 447,621.79
5Capital Charge Per Year= 44,708.85
6Running Cost Per Year= 22,000.00

Assumptions and limits

The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation or tax into account.
Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Why not just compare present values?

Present values favour short-lived assets because they ignore the cost of replacing them. EAC puts every option on a per-year footing.

Should salvage value be included?

Yes — subtract its present value from total costs before annualising.