A special-purpose machine is to be purchased at a cost of $30,000. The following table shows the expected annual operating and maintenance cost and the salvage value for each year of service: Year of Service O & M Cost Market Value 1 $5,000 $25,800 2 $6,500 $16,000 3 $10,000 $10,000 4 $12,500 $5,000 5 $14,800 $0If the interest rate is 12%, what is the economic service life for this machine?
A special-purpose machine is to be purchased at a cost of $30,000. The following table shows the expected annual operating and maintenance cost and the salvage value for each year of service: Year of Service O & M Cost Market Value 1 $5,000 $25,800 2 $6,500 $16,000 3 $10,000 $10,000 4 $12,500 $5,000 5 $14,800 $0If the interest rate is 12%, what is the economic service life for this machine?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A special-purpose machine is to be purchased at a cost of $30,000. The following table shows the expected annual operating and maintenance cost and the salvage value for each year of service:
Year of Service O & M Cost Market Value
1 $5,000 $25,800
2 $6,500 $16,000
3 $10,000 $10,000
4 $12,500 $5,000
5 $14,800 $0
If the interest rate is 12%, what is the economic service life for this machine?
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