TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4) (4) Cost of (6) [= (3) + (4) + (5)] Total (Marginal) Cost for Year (3) (7) EUAC through Year k (5) Loss in Market Capital = 10% (1) (2) End of MV, End Annual Value (MV) Year, k of Year k during Year k of Beginning Expenses (Ek) of Year MV (TCx) $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 12,918 N* = 3 12,750 9,750 4,125 1,688 7,000 12,813 4 3,000 1,275 10,000 14,275 13,211 5 7,125 2,625 975 13,000 16,600 13,766 a EUAC; = E TC;(P/F, 10%,j)|(4/P, 10%, k) 2j=l
TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4) (4) Cost of (6) [= (3) + (4) + (5)] Total (Marginal) Cost for Year (3) (7) EUAC through Year k (5) Loss in Market Capital = 10% (1) (2) End of MV, End Annual Value (MV) Year, k of Year k during Year k of Beginning Expenses (Ek) of Year MV (TCx) $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 12,918 N* = 3 12,750 9,750 4,125 1,688 7,000 12,813 4 3,000 1,275 10,000 14,275 13,211 5 7,125 2,625 975 13,000 16,600 13,766 a EUAC; = E TC;(P/F, 10%,j)|(4/P, 10%, k) 2j=l
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
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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, as shown in the 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.
![TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4)
(4)
Cost of
(6)
[= (3) + (4) + (5)]
Total (Marginal)
Cost for Year
(3)
(7)
EUAC
through
Year k
(5)
Loss in Market Capital = 10%
(1)
(2)
End of MV, End
Annual
Value (MV)
Year, k of Year k during Year k
of Beginning Expenses
(Ek)
of Year MV
(TCx)
$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
12,918 N* = 3
12,750
9,750
4,125
1,688
7,000
12,813
4
3,000
1,275
10,000
14,275
13,211
5
7,125
2,625
975
13,000
16,600
13,766
a EUAC; = E TC;(P/F, 10%,j)|(4/P, 10%, k)
2j=l](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9e2c8d7d-6f75-4305-b5ab-b8fd4112049c%2F2d043ae8-d3a8-4ab7-adec-fccb41e08513%2Fdbmc20h_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
(6)
[= (3) + (4) + (5)]
Total (Marginal)
Cost for Year
(3)
(7)
EUAC
through
Year k
(5)
Loss in Market Capital = 10%
(1)
(2)
End of MV, End
Annual
Value (MV)
Year, k of Year k during Year k
of Beginning Expenses
(Ek)
of Year MV
(TCx)
$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
12,918 N* = 3
12,750
9,750
4,125
1,688
7,000
12,813
4
3,000
1,275
10,000
14,275
13,211
5
7,125
2,625
975
13,000
16,600
13,766
a EUAC; = E TC;(P/F, 10%,j)|(4/P, 10%, k)
2j=l
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