Present Value Method

(Lives of Options are the same)

PV =Co+ Ao
[
( 1+i )n−1
i ( 1+i ) n
] −n
−Cl ( 1+ i ) P V A < P V B , pick A

Annual Equivalent Cost

[ ] [ ]
n
i ( 1+i ) i
AEC= Ao+Co n
−Cl
( 1+i ) −1 (1+i )n−1

AEC A < AE C B , pick A

Annual Cost Method

AC= Ao+ Annual Depreciation+ MARR

AC= Ao+ ( Co−Cl )

[ i
(1+i ) L−1 ]
+Co(i )

A C A < A C B , pick A

When lives of options are different

with present value, extend to LCM