Question

Answer the question. A new robot could be acquired for $60,000, and be kept for up to 4 years. Its annual expenses would be $6,00 $9,000, $14,000, and $20,000 in years 1 to 4 in the same order. The robot's market value would be 545,000 $33,750, $25,500, and $19,500 at the end of years 1 to 4 in the same order. Determine the economic life of the robot, assuming 10% cost of capital. 1 in F B I D E s % $ * %

Answer 1

4 AB C D E F G H I J K L M N O P Q R S T U V 60000.00 Acquisition cost Equivalent annual cost EAC 66000.00 34571.43 24126.89 18928.25 --PMT(10%,B6,$C$3...) -PMT(10%,B7,$C$3..) --PMT(10%,B8,$C$3.) --PMT(10%,89,$C$3.) Net EAC = EAC of acquisition + annual expense - EAC of mkt value Net EAC Yr Net EAC The minimum EAC is at year 3. so that is the economic life 1 27000.00 2 25928.57 3 25836.86 4 26421.46 Annual Maintenance Expenses Annual expenses EAC 6000.00 6000.00 3-PMT(10%,813,NPV(0.1,$C$13:013)..) 9000.00 7428.57 --PMT(10%,814,NPV(0.1,$C$13:C14)..) 14000.00 '9413.90 --PMT(10%,815, NPV(0.1,$C$13:015)..) 20000.00 11694.89 --PMT(10%,816,NPV(0.1,$C$13:016)..) Robots market value Mkt value 45000.00 33750.00 25500.00 19500.00 EAC 45000.00 --PMT(10%,B20,,c20) 16071.43 -PMT(10%,B21,,C21,) 7703.93 --PMT(10%,822,c22) 4201.68 --PMT(10%,B23, C23,)