TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4) (4) Cost of (3) Loss in Market Capital = 10% Value (MV) (6) [= (3) + (4) + (5)] Total (Marginal) Cost for Year (5) Annual (7) EUACa (1) End of MV, End Year, k of Year k during Year k (2) of Beginning of Year MV through Year k Expenses (Ek) (TCk) $30,000 1 22,500 $7,500 $3,000 $3,000 $13,500 $13,500 2 16,875 5,625 2,250 4,500 12,375 12,964 3 12,750 4,125 1,688 7,000 12,813 12,918 N* = 3 4 9,750 3,000 1,275 10,000 14,275 13,211 5 7,125 2,625 975 13,000 16,600 13,766 [EL, TG(P|F, 10%.j)](4/P,10%, k) a EUACK = -j=1 (A/P,
TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4) (4) Cost of (3) Loss in Market Capital = 10% Value (MV) (6) [= (3) + (4) + (5)] Total (Marginal) Cost for Year (5) Annual (7) EUACa (1) End of MV, End Year, k of Year k during Year k (2) of Beginning of Year MV through Year k Expenses (Ek) (TCk) $30,000 1 22,500 $7,500 $3,000 $3,000 $13,500 $13,500 2 16,875 5,625 2,250 4,500 12,375 12,964 3 12,750 4,125 1,688 7,000 12,813 12,918 N* = 3 4 9,750 3,000 1,275 10,000 14,275 13,211 5 7,125 2,625 975 13,000 16,600 13,766 [EL, TG(P|F, 10%.j)](4/P,10%, k) a EUACK = -j=1 (A/P,
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
A new forklift truck will require an investment of $30,000 and is expected to have year-end MVs and annual expenses as shown in columns 2 and 5, respectively, of the shown Table . If the before-tax MARR is 10% per year, how long should the asset be retained in service? Solve by hand and by spreadsheet. By how much would the MARR have to change before the economic life decreases by one year? How about to increase the economic life by one year?
![TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4)
(4)
Cost of
(3)
Loss in Market Capital = 10%
Value (MV)
(6)
[= (3) + (4) + (5)]
Total (Marginal)
Cost for Year
(5)
Annual
(7)
EUACa
(1)
End of MV, End
Year, k of Year k during Year k
(2)
of Beginning
of Year MV
through
Year k
Expenses
(Ek)
(TCk)
$30,000
1
22,500
$7,500
$3,000
$3,000
$13,500
$13,500
2
16,875
5,625
2,250
4,500
12,375
12,964
3
12,750
4,125
1,688
7,000
12,813
12,918 N* = 3
4
9,750
3,000
1,275
10,000
14,275
13,211
5
7,125
2,625
975
13,000
16,600
13,766
[EL, TG(P|F, 10%.j)](4/P,10%, k)
a EUACK =
-j=1
(A/P,](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F32e6db58-1884-4ceb-b66b-d1b107bd96ec%2Fb391fdc8-dad5-4753-b5f1-9116f7586032%2Ff99strg_processed.png&w=3840&q=75)
Transcribed Image Text:TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4)
(4)
Cost of
(3)
Loss in Market Capital = 10%
Value (MV)
(6)
[= (3) + (4) + (5)]
Total (Marginal)
Cost for Year
(5)
Annual
(7)
EUACa
(1)
End of MV, End
Year, k of Year k during Year k
(2)
of Beginning
of Year MV
through
Year k
Expenses
(Ek)
(TCk)
$30,000
1
22,500
$7,500
$3,000
$3,000
$13,500
$13,500
2
16,875
5,625
2,250
4,500
12,375
12,964
3
12,750
4,125
1,688
7,000
12,813
12,918 N* = 3
4
9,750
3,000
1,275
10,000
14,275
13,211
5
7,125
2,625
975
13,000
16,600
13,766
[EL, TG(P|F, 10%.j)](4/P,10%, k)
a EUACK =
-j=1
(A/P,
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 8 steps with 7 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education