Question: 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

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.

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