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 LOADING... are zero for all assets. Further data concerning the four pairs of assets are given in the table that follows. Asset First Cost Initial Operating Cost Rate of Operating Cost Increase MARR A $120,000 $35,000 13.5%/year 5% B $120,000 $35,000 13.5%/year 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.