Question: A $40,000 machine will be purchased by a company whose interest rate is 12%. The installation cost is $5K, and the removal costs are insignificant.

A $40,000 machine will be purchased by a company whose interest rate is 12%. The installation cost is $5K, and the removal costs are insignificant. What is its economic life if its salvage values and O&M costs are as follows:

Year 1 2 3 4 5

S $35K $30K $25K $20K $15K

O&M $8K $14K $20K $26K $32K

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