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ase show the steps to answer question a, the correct answer is the "economic life of asset A is 3 years, and the economic life of asset B is 6 year". Ignore part b and c,   Thank you

ase show the steps to answer question a, the correct answer is the "economic life of asset A is 3 years, and the economic life of asset B is 6 year". Ignore part b and c,   Thank you

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
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Please show the steps to answer question a, the correct answer is the "economic life of asset A is 3 years, and the economic life of asset B is 6 year". Ignore part b and c,

 

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The following pair of assets differ only in the MARR. The problem asks you to determine the effect of this difference on the economic life and to explain the result. All assets decline in value by 20 percent of current value each year. Installation costs are zero for all assets. Further data concerning the four pairs of assets are given in the table that follows. Initial Operating Rate of Operating First Cost $125,000 $125.000 Asset Cost Cost Increase $30,000 $30,000 13.5%/year 13.5%lyear MARR 5% 25% A. a. Determine the economic lives for assets A and B. b. Create a diagram showing the EAC(capital), the EAC(operating), and the EAC(total) for assets A and B. c. Explain the difference in economic life between A and B. Click the icon to view the table of compound interest factors for discrete compounding periods when i= 5%. a. The economic life of asset A is years, and the economic life of asset B is years. (Type whole numbers.)
Transcribed Image Text:The following pair of assets differ only in the MARR. The problem asks you to determine the effect of this difference on the economic life and to explain the result. All assets decline in value by 20 percent of current value each year. Installation costs are zero for all assets. Further data concerning the four pairs of assets are given in the table that follows. Initial Operating Rate of Operating First Cost $125,000 $125.000 Asset Cost Cost Increase $30,000 $30,000 13.5%/year 13.5%lyear MARR 5% 25% A. a. Determine the economic lives for assets A and B. b. Create a diagram showing the EAC(capital), the EAC(operating), and the EAC(total) for assets A and B. c. Explain the difference in economic life between A and B. Click the icon to view the table of compound interest factors for discrete compounding periods when i= 5%. a. The economic life of asset A is years, and the economic life of asset B is years. (Type whole numbers.)
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