A special purpose NASA fuel cell requires an investment of $80,000 and hasno MV at any time. Operating expenses in year k are given by Ck = $10,000 +$6,000 (k - 1). Obsolescence is reflected in increased operating expenses andis equivalent to $4,000 per year—this expense has not been included in theequation for Ck. Solve, a. Determine the economic life of the fuel cell if i = 0%. b. Repeat Part (a) when the $4,000 per year is ignored. What can you conclude about the influence of an expense that is constant over time on the economic life?
A special purpose NASA fuel cell requires an investment of $80,000 and hasno MV at any time. Operating expenses in year k are given by Ck = $10,000 +$6,000 (k - 1). Obsolescence is reflected in increased operating expenses andis equivalent to $4,000 per year—this expense has not been included in theequation for Ck. Solve, a. Determine the economic life of the fuel cell if i = 0%. b. Repeat Part (a) when the $4,000 per year is ignored. What can you conclude about the influence of an expense that is constant over time on the economic life?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A special purpose NASA fuel cell requires an investment of $80,000 and has
no MV at any time. Operating expenses in year k are given by Ck = $10,000 +
$6,000 (k - 1). Obsolescence is reflected in increased operating expenses and
is equivalent to $4,000 per year—this expense has not been included in the
equation for Ck. Solve, a. Determine the economic life of the fuel cell if i = 0%. b. Repeat Part (a) when the $4,000 per year is ignored. What can you conclude about the influence of an expense that is constant over time on the economic life?
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