Calculate the economic life of the machine

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Reference no: EM13152831

A production machine is purchased at a cost of $95,000. The inflation rate for the next 10 years is estimated at 2.5% per year. The annual operating and maintenance costs for the machine are $15,000 at the end of the first year and are expected to increase at an annual rate of 2.5% in constant dollars. The salvage value is given by the expression S= $95,000-$5,000t , where t is the yearend in question. For an annual market interest rate of %9, calculate the economic life of the machine. Show the results of your calculations on a graph.

Reference no: EM13152831

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