Equipment Investment Decisions

Enhancing Equipment Investment Decisions Using Equivalent Annual Cost (PDF Download)

Cornell Center For Hospitality Research

For any piece of equipment or system required to operate a hospitality business, there are typically many available choices that would perform various required functions. But while any of those machines may do a particular job, they are likely to differ in ways that make selection complicated.

For example, some commercial ice machines are air-cooled while others are water-cooled. Both make ice, of course, but the purchase decision involves contrasting considerations. Air-cooled machines are less expensive upfront, but they have higher annual operating costs. On the other hand, water-cooled machines are more expensive upfront, while presenting lower annual operating costs. Beyond that, the two types of ice machine may have different expected useful lives. In combination, these factors (as well as possible external considerations) make it complicated to determine the most cost-effective choice.

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