A large, standby electricity generator in a hospital operating room has a first cost of $70,000 and may be used for a maximum of 6 years Its salvage value , which decreases by 15 per year, is described by the equation S 70,000(1 0 15) n, where n is the number of years after purchase The operating c...

AW 1 70000AP121 75000 59500AF121 93900 AW 2 70000AP122 7500 ...

A large, standby electricity generator in a hospital operating room has a first cost of $70,000 and

Question:

A large, standby electricity generator in a hospital operating room has a first cost of $70,000 and may be used for a maximum of 6 years. Its , which decreases by 15% per year, is described by the equation S = 70,000(1 – 0.15) n, where n is the number of years after purchase. The operating cost of the generator will be constant at $75,000 per year. At an interest rate of 12% per year, what are the economic service life and the associated AW value?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...