Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribedimage text in transcribedimage text in transcribed
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 are zero for all assets. Further data concerning the four pairs of assets are given in the table that follows. Initial Operating Rate of Operating Asset First Cost Cost Cost Increase MARR A $135,000 $30,000 11.5%/year 5% B $135,000 $30,000 11.5%/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. Click the icon to view the table of compound interest factors for discrete compounding periods when i = 5%. a. The economic life of asset A is years, and the economic life of asset B is |years. (Type whole numbers.) b. Create a diagram for asset A. Choose the correct diagram below.O A. O B. + 90000- 900007 4446484644444464 Total Total EAC (AssetA) EAC (AssetA) Maintenance Maintenance Capital Capital 16 16 Year Year O C. OD. + 900007 90000- Total 4446404644444444 Total EAC (Asset A) EAC (Asset A) Maintenance Maintenance Capital Capital 16 16 Year YearCreate a diagram for asset B. Choose the correct diagram below. O A. O B. 1000007 100000- AAAAAAAAAA4 44444 Total Total A444444444448444 Maintenance Maintenance EAC (Asset B) EAC (Asset B) Capital Capital 16 16 Year Year O c. OD. 100000- Total 1000007 AAAA AAAA4 4 4 4 4 4 4 Total 4444444444448444 Maintenance Maintenance EAC (Asset B) EAC (Asset B) Capital Capital 16 16 Year Year c. Explain the difference in economic life between A and B. The economic life is when the MARR is higher

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Plenitude The New Economics Of True Wealth

Authors: Juliet Schor

1st Edition

1594202540, 9781594202544

More Books

Students also viewed these Economics questions