In a replacement analysis problem, the following facts are known:
Initial cost....................................$12,000
Annual Maintenance........................None for the first 3 years
................................................. $2000 at the end of the
.................................................Fourth year
................................................. $2000 at the end of the
.................................................Fifth year
.................................................Increasing $2500 per year
.................................................After the fifth year
................................................. ($4500 at the end of the
.................................................Sixth year, $7000 at the
.................................................End of the seventh year, etc.)
Actual salvage value in any year is zero. Assume a 10% interest rate and ignore income taxes. Compute the life for this challenger having the lowest EUAC?