Question: A $40,000 machine will be purchased by a company whose interest rate is 12%. The installation cost is $10K, and removal costs are insignificant. What

A $40,000 machine will be purchased by a company whose interest

A $40,000 machine will be purchased by a company whose interest rate is 12%. The installation cost is $10K, and removal costs are insignificant. What is its economic life if its salvage values and O&M costs are as follows? (a) Year 1 2 3 4 5 S $25K $20K $15K $10K $5K O&M $4K $7.5K $11K $14.5K $1.5K/year (b) For lives of 6 years or more, an overhaul costing $15 K is required of the end of year 5

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