A new$40,000bottlingmachinehasjust been installed in a plant. It will have no salvage value when it is removed.

Question:

A new$40,000bottlingmachinehasjust been installed in a plant. It will have no salvage value when it is removed. The plant manager has asked you to estimate the economic service life for the machine, ignoring income taxes. He estimates that the annual maintenance cost will be constant at $2500 per year. What service life will result in the lowest equivalent uniform annual cost?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...