A three-year-old small crane is being considered for early replacement. Its current market value is $17,500. Estimated future market values and annual operating costs for the next five years are given in the table below. What is the economic life for this crane if the interest rate is 5.1% per year? | Year | Market Value | Annual Operating Cost | | :--- | :--- | :--- | | 0 | $17,500 | | | 1 | $15,110 | $4,700 | | 2 | $12,930 | $4,809 | | 3 | $10,110 | $4,883 | | 4 | $7,400 | $4,997 | | 5 | $0 | $5,095 |
Added by Sounk D.
Close
Step 1
The Present Worth is the sum of the current market value and the present value of all future operating costs and salvage values. Show more…
Show all steps
Your feedback will help us improve your experience
Shu Naito and 86 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
A crane rental company has acquired a new heavy-duty crane for $300,000. The company calculates depreciation on this equipment on the basis of number of rentals per year, and the salvage value of the crane at the end of its 10-year life is $30,000. If the crane is rented an average of 120 days per year, what is the depreciation rate per rental?
Rahul M.
What is the future value (maturity value) of $10,000 invested for five years at 9.75% compounded semiannually?
Sameer K.
A manufacturing company is considering investing in a new cutting machine that will cost $131,000 and has an annual maintenance cost of $16,000. There is no salvage value for the machine. If the machine will last for a total of 4 years under these conditions and the costs do not change, what is the net present worth (NPW) of this investment at an interest rate of 12%? Even though all of the dollar values are costs, express your answer as a positive number (i.e., net present cost).
Manasvee S.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD