Annual Equivalent Cost Calculator

✖Asset Price refers to the current market value or the price at which a particular asset, such as a stock, bond, real estate property, or commodity, can be bought or sold in the market.ⓘ Asset Price [ASP]			+10% -10%
✖Discount Rate is the interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve Bank’s discount window.ⓘ Discount Rate [DR]			+10% -10%
✖Number of Periods is the periods on an annuity using the present value, periodic payment, and periodic rate.ⓘ Number of Periods [n]			+10% -10%

✖Annual Equivalent Cost represents a uniform annual cost that would be equivalent to the costs associated with the project over its lifespan.ⓘ Annual Equivalent Cost [AEC]

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Formula

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Annual Equivalent Cost

Formula

`"AEC" = ("ASP"*"DR")/(1-(1+"DR")^-"n")`

Example

`"5916.981"=("10000"*"0.12")/(1-(1+"0.12")^-"2")`

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Annual Equivalent Cost Solution

STEP 0: Pre-Calculation Summary

Formula Used

Annual Equivalent Cost = (Asset Price*Discount Rate)/(1-(1+Discount Rate)^-Number of Periods)
AEC = (ASP*DR)/(1-(1+DR)^-n)
This formula uses 4 Variables

Variables Used

Annual Equivalent Cost - Annual Equivalent Cost represents a uniform annual cost that would be equivalent to the costs associated with the project over its lifespan.
Asset Price - Asset Price refers to the current market value or the price at which a particular asset, such as a stock, bond, real estate property, or commodity, can be bought or sold in the market.
Discount Rate - Discount Rate is the interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve Bank’s discount window.
Number of Periods - Number of Periods is the periods on an annuity using the present value, periodic payment, and periodic rate.

STEP 1: Convert Input(s) to Base Unit

Asset Price: 10000 --> No Conversion Required
Discount Rate: 0.12 --> No Conversion Required
Number of Periods: 2 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

AEC = (ASP*DR)/(1-(1+DR)^-n) --> (10000*0.12)/(1-(1+0.12)^-2)

Evaluating ... ...

AEC = 5916.98113207547

STEP 3: Convert Result to Output's Unit

5916.98113207547 --> No Conversion Required

FINAL ANSWER

5916.98113207547 ≈ 5916.981 <-- Annual Equivalent Cost

(Calculation completed in 00.004 seconds)

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Created by Vishnu K

BMS College of Engineering (BMSCE), Bangalore

Vishnu K has created this Calculator and 200+ more calculators!

Verified by Kashish Arora

Satyawati College (DU), New Delhi

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< 23 Financial Accounting Calculators

DuPont Analysis

Go Return on Equity = (Net Income/Revenue)*(Revenue/Average Total Assets)*(Average Total Assets/Average Total Equity)

Internal Rate of Return

Go Net Present Value = sum(x,0,Number of Periods,((Cashflow at End Period/(1+Internal Rate of Return)^x)))-Initial Investment

Net Operating Cycle

Go Net Operating Cycle = ((365/Purchases)*Average Inventory)+((365/Net Receivables)*Average Accounts Receivables)

Discount Lost

Go Discount Lost = (Discount Percentage/(100-Discount Percentage))*(365/(Final Payment Date-Last Discount Date))

Annual Equivalent Cost

Go Annual Equivalent Cost = (Asset Price*Discount Rate)/(1-(1+Discount Rate)^-Number of Periods)

Net Present Value

Go Net Present Value = sum(x,1,Time Period,(Cash Flow/(1+Internal Rate of Return)^x))

Annual Percentage Yield

Go Annual Percentage Yield = (1+(Stated annual interest rate/Compounding Periods))^Compounding Periods-1

Effective Yield

Go Effective Yield = 1+(Nominal Rate/Number of Payments Per Year)^(Number of Payments Per Year)-1

Depletion Charge per Unit

Go Depletion Charge per Unit = (Original Cost-Residual Value)/Total Number of Units Depletion

Value of Stock

Go Value of Stock = Expected Dividend Per Share/(Cost of Capital Equity-Dividend Growth Rate)

Shareholders' Equity given Share Capital, Retained Earnings and Treasury Shares

Go Total Shareholders' Equity = Share Capital+Retained Earnings-Treasury Shares

Operating Cash Flow

Go Operating Cash Flow = Earnings Before Interest and Taxes+Depreciation-Taxes

EBITDA

Go EBITDA = Earnings Before Interest and Taxes+Depreciation+Amortization

Discount Percentage

Go Discount Percentage = ((List Price-Price Paid)/Price Paid)*100

Residual Value

Go Residual Value = (Cost of fixed asset-Scrap Rate)/Lifespan

Long term Debt to Equity ratio

Go Long Term Debt to Equity Ratio = Long Term Debt/Shareholders Fund

EBIT

Go Earnings Before Interest and Taxes = Revenue-Operating Expense

Depletion Expense

Go Depletion Expense = Depletion Charge per Unit*Units Consumed

Shareholders' Equity given Total Assets and Liabilities

Go Total Shareholders' Equity = Total Assets-Total Liabilities

Discount Factor

Go Discount Factor = 1/(1*(1+Discount Rate)^Number of Periods)

Discount given Discount Rate and List Price

Go Discount = Discount Rate*List Price

Discount given List Price and Price Paid

Go Discount = List Price-Price Paid

List Price

Go List Price = Price Paid+Discount

Annual Equivalent Cost Formula

Annual Equivalent Cost = (Asset Price*Discount Rate)/(1-(1+Discount Rate)^-Number of Periods)
AEC = (ASP*DR)/(1-(1+DR)^-n)

What is Annual Equivalent Cost?

The Annual Equivalent Cost (AEC) is a financial metric used in capital budgeting to assess the annualized cost of an investment over its useful life. It represents the equivalent annual cost of owning and operating an asset, factoring in initial investment, operating expenses, and salvage value. By converting the total cost of an investment into an annualized figure, the AEC enables comparison with alternative investment options or operating expenses on an equal footing. This allows decision-makers to evaluate projects with differing lifespans or cash flow patterns more effectively, ensuring a comprehensive assessment of the long-term financial impact of investment decisions.
In essence, the AEC simplifies complex investment evaluations by spreading the total cost of ownership across each year of the asset's useful life, facilitating comparisons with recurring expenses or alternative investment opportunities on an annual basis.

How to Calculate Annual Equivalent Cost?

Annual Equivalent Cost calculator uses Annual Equivalent Cost = (Asset Price*Discount Rate)/(1-(1+Discount Rate)^-Number of Periods) to calculate the Annual Equivalent Cost, The Annual Equivalent Cost formula is defined as a financial metric used in capital budgeting to evaluate the annual cost of an investment or project over its entire lifespan, considering factors such as initial investment, operating expenses, salvage value, and depreciation. Annual Equivalent Cost is denoted by AEC symbol.

How to calculate Annual Equivalent Cost using this online calculator? To use this online calculator for Annual Equivalent Cost, enter Asset Price (ASP), Discount Rate (DR) & Number of Periods (n) and hit the calculate button. Here is how the Annual Equivalent Cost calculation can be explained with given input values -> 5916.981 = (10000*0.12)/(1-(1+0.12)^-2).

FAQ

What is Annual Equivalent Cost?

The Annual Equivalent Cost formula is defined as a financial metric used in capital budgeting to evaluate the annual cost of an investment or project over its entire lifespan, considering factors such as initial investment, operating expenses, salvage value, and depreciation and is represented as AEC = (ASP*DR)/(1-(1+DR)^-n) or Annual Equivalent Cost = (Asset Price*Discount Rate)/(1-(1+Discount Rate)^-Number of Periods). Asset Price refers to the current market value or the price at which a particular asset, such as a stock, bond, real estate property, or commodity, can be bought or sold in the market, Discount Rate is the interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve Bank’s discount window & Number of Periods is the periods on an annuity using the present value, periodic payment, and periodic rate.

How to calculate Annual Equivalent Cost?

The Annual Equivalent Cost formula is defined as a financial metric used in capital budgeting to evaluate the annual cost of an investment or project over its entire lifespan, considering factors such as initial investment, operating expenses, salvage value, and depreciation is calculated using Annual Equivalent Cost = (Asset Price*Discount Rate)/(1-(1+Discount Rate)^-Number of Periods). To calculate Annual Equivalent Cost, you need Asset Price (ASP), Discount Rate (DR) & Number of Periods (n). With our tool, you need to enter the respective value for Asset Price, Discount Rate & Number of Periods and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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