Consider a piece of equipment that initially cost $8,000 and has these estimated annual expenses and MV:

If the after-tax MARR is 7% per year, determine the after-tax economic life of this equipment. MACRS (GDS) depreciation is being used (five-year property class). The effective income tax rate is 40%.

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End of Year, k Annual Expenses MV at End of Year $3,000 $ 3,000 3,500 4,000 4,500 5,250 6,250 7,750 $4,700 3,.200 2,200 1,450 950 600 300