Problem 1: Economic Life of Equipment

Given: $500,000 is invested in construction equipment. Experience shows that the salvage value for this equipment decreases at a rate of 25% per year. O&M costs increase at a rate of 15 % per year; the O&M cost equals $125,000 the first year of use. Assume i = 10%

Find: Economic Life of the equipment. Plot time v. EUAC .

Method: Use Capital Recovery Cost Method