A piece of equipment has a first cost of $165000, a maximum useful life of 7 years, and a market (salvage) value described by the relation S = 120,000-19000k, where k is the number of years since it was purchased. The salvage value cannot go below zero. The AOC series is estimated using AOC = 60,000 + 10000k. The interest rate is 12.00% per year. Determine the economic service life and the respective AW. The economic service life is 4.00 years, what is the AW value ($)?

A piece of equipment has a first cost of $165000, a maximum useful life of 7 years, and a market (salvage) value described by the relation S = 120,000-19000k, where k is the number of years since it was purchased. The salvage value cannot go below zero. The AOC series is estimated using AOC = 60,000 + 10000k. The interest rate is 12.00% per year. Determine the economic service life and the respective AW. The economic service life is 4.00 years, what is the AW value ($)?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 6E

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