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The following pair of assets differ only in the MARR. The problem asks you to determine the effect of this difference on the economic life and to explain the result. All assets decline in value by 20 percent of current value each year. Installation costs are zero for all assets. Further data concerning the four pairs of assets are given in the table that follows. Initial Operating Rate of Operating Asset A First Cost Cost $135,000 B $135,000 $35,000 $35,000 Cost Increase 12.5%/year 12.5%/year MARR 5% 25% a. Determine the economic lives for assets A and B. b. Create a diagram showing the EAC(capital), the EAC(operating), and the EAC(total) for assets A and B. c. Explain the difference in economic life between A and B. Click the icon to view the table of compound interest factors for discrete compounding periods when i = 5%. a. The economic life of asset A is (Type whole numbers.) years, and the economic life of asset B is years.

The following pair of assets differ only in the MARR. The problem asks you to determine the effect of this difference on the economic life and to explain the result. All assets decline in value by 20 percent of current value each year. Installation costs are zero for all assets. Further data concerning the four pairs of assets are given in the table that follows. Initial Operating Rate of Operating Asset A First Cost Cost $135,000 B $135,000 $35,000 $35,000 Cost Increase 12.5%/year 12.5%/year MARR 5% 25% a. Determine the economic lives for assets A and B. b. Create a diagram showing the EAC(capital), the EAC(operating), and the EAC(total) for assets A and B. c. Explain the difference in economic life between A and B. Click the icon to view the table of compound interest factors for discrete compounding periods when i = 5%. a. The economic life of asset A is (Type whole numbers.) years, and the economic life of asset B is years.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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
Chapter1: Introduction And Goals Of The Firm
Section: Chapter Questions
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The following pair of assets differ only in the MARR. The problem asks you to determine the effect of this difference on the economic life and to explain the result. All assets decline in value by 20 percent of current value each year. Installation costs are zero for all assets. Further data concerning the four pairs of assets are given in the table that follows. Initial Operating Rate of Operating Asset A First Cost Cost $135,000 B $135,000 $35,000 $35,000 Cost Increase 12.5%/year 12.5%/year MARR 5% 25% a. Determine the economic lives for assets A and B. b. Create a diagram showing the EAC(capital), the EAC(operating), and the EAC(total) for assets A and B. c. Explain the difference in economic life between A and B. Click the icon to view the table of compound interest factors for discrete compounding periods when i = 5%. a. The economic life of asset A is (Type whole numbers.) years, and the economic life of asset B is years.
Transcribed Image Text:The following pair of assets differ only in the MARR. The problem asks you to determine the effect of this difference on the economic life and to explain the result. All assets decline in value by 20 percent of current value each year. Installation costs are zero for all assets. Further data concerning the four pairs of assets are given in the table that follows. Initial Operating Rate of Operating Asset A First Cost Cost $135,000 B $135,000 $35,000 $35,000 Cost Increase 12.5%/year 12.5%/year MARR 5% 25% a. Determine the economic lives for assets A and B. b. Create a diagram showing the EAC(capital), the EAC(operating), and the EAC(total) for assets A and B. c. Explain the difference in economic life between A and B. Click the icon to view the table of compound interest factors for discrete compounding periods when i = 5%. a. The economic life of asset A is (Type whole numbers.) years, and the economic life of asset B is years.
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