Using the asset description and table below, find the economic service life (ESL) of the asset, assuming MARR = 8%. The company is committed to using the asset for the upcoming year, but is unsure about the following years. Today's market value is $70,000, and it will last another 4 years before failure. Each year, the after-tax market value decreases by $10,000. The operating cost of the asset in year 1 is expected to be $30,000, and it will increase by $5,000 each year through year 4. a. 3 years b. 1 year c. 4 years d. 2 years
Using the asset description and table below, find the economic service life (ESL) of the asset, assuming MARR = 8%. The company is committed to using the asset for the upcoming year, but is unsure about the following years. Today's market value is $70,000, and it will last another 4 years before failure. Each year, the after-tax market value decreases by $10,000. The operating cost of the asset in year 1 is expected to be $30,000, and it will increase by $5,000 each year through year 4. a. 3 years b. 1 year c. 4 years d. 2 years
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Using the asset description and table below, find the economic service life (ESL) of the asset, assuming MARR = 8%.
The company is committed to using the asset for the upcoming year, but is unsure about the following years. Today's market value is $70,000, and it will last another 4 years before failure. Each year, the after-tax market value decreases by $10,000. The operating cost of the asset in year 1 is expected to be $30,000, and it will increase by $5,000 each year through year 4.
a. 3 years
b. 1 year
c. 4 years
d. 2 years
Transcribed Image Text:(A/P,8%,n)
1.0800
SOHN3
n
0
1
0.5608
0.3880
0.3019 4
2
M.V
Op. Cost
CR(8%)
OC(8%)
AEC (8%)
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