Understanding the Equivalent Annual Cost (EAC)
One of the key metrics used in finance and capital budgeting to determine which investment options are the most cost-effective is Equivalent Annual Cost, or EAC. The concept of EAC provides a way of comparing projects, assets, or investment alternatives that cover different time periods by converting their costs into a consistent, annualized figure. This allows the decision-makers to make the right decision based on a more explicit understanding of the annual cost impact of an investment throughout its life cycle