Equivalent Annual Cost Calculator

About this calculator

The Equivalent Annual Cost (EAC) converts the total cost of owning an asset over its whole useful life into a single, level yearly figure, using a discount rate to account for the time value of money. It's calculated by taking the asset's net present value of costs and dividing by an annuity factor for its lifespan — the same logic in reverse of computing a loan payment from a present value.

EAC exists specifically to solve a problem that a simple total-cost comparison gets wrong: comparing a machine that lasts 5 years against one that lasts 12 years isn't fair on total cost alone, since the cheaper-looking option might just have a shorter life. By annualizing both, EAC lets finance teams, procurement managers, and asset planners compare assets with different lifespans on equal footing and choose the option that's actually cheaper per year of use.