12s.7 The following table summarizes the financial data for a proposed new asset. The
issue is how long the asset should be kept. Assume an interest rate of 12% and
determine the economic service life of the asset before taxes.
End of Year ($n$) Investment Cost O&M Cost Salvage Value
0
$14,000
1
$3,400
$8,000
2
$4,600
$6,000
3
$5,800
$4,000
4
$7,200
$2,000
5
$8,300
$0
(a) 2 years
(b) 3 years
(c) 4 years
(d) 5 years