August 2004
Intermediate to advanced
656 pages
15h 28m
English
The procedure for finding the economic life of an asset involves calculating the total AE(i) costs of holding the asset for various lengths of time. The total AE(i) cost will be the sum of the CR(i) plus the AE(i) of the operating and maintenance cost cash-flow stream for that many years. The year with the minimum total AE(i) cost is the economic life of that asset.
As an example calculation, assume that an organization is planning to buy a new computer. The relevant estimates are assumed to be as follows:
The computer has a purchase price of $10,000.
The salvage value starts at $7000 and decreases by $1000 each year.
Maintenance and operation costs start at $1000 and increase by $500 each year.
The MARR is ...
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