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5. An item of equipment is to be purchased for $950,000. The anticipated operating costs, maintenance costs and salvage values for each year are detailed in the table overleaf. Determine the economic life of the equipment. It may be assumed that the cost of capital is 10%, depreciation for tax purposes of capital expenditure is allowable at 30% on a declining balance basis and the effective tax rate is 50%. $ Years of service Operating cost for Maintenance cost Salvage value at year for year end of year 1 40,000 10,000 100,000 60,000 10,000 90,000 70,000 12,000 80,000 70,000 14,000 70,000 80,000 16,000 60,000 80,000 18,000 50,000 7 80,000 20,000 40,000 8 80,000 25,000 30,000 9 100,000 26,000 20,000 10 110,000 28,000 10,000 OO 00 OWN 5. An item of equipment is to be purchased for $950,000. The anticipated operating costs, maintenance costs and salvage values for each year are detailed in the table overleaf. Determine the economic life of the equipment. It may be assumed that the cost of capital is 10%, depreciation for tax purposes of capital expenditure is allowable at 30% on a declining balance basis and the effective tax rate is 50%. $ Years of service Operating cost for Maintenance cost Salvage value at year for year end of year 1 40,000 10,000 100,000 60,000 10,000 90,000 70,000 12,000 80,000 70,000 14,000 70,000 80,000 16,000 60,000 80,000 18,000 50,000 7 80,000 20,000 40,000 8 80,000 25,000 30,000 9 100,000 26,000 20,000 10 110,000 28,000 10,000 OO 00 OWN