Contemporary Engineering Economics 6th Edition by Chan Park

Exercise 22

Given the following data:
I = $30,000
S n = 22,000 2,000 n
B n = 30,000 3,000 n
O M n = 3,000 × (1 + 0.15) n 1
and
t m = 0.40
where
I = Asset purchase price
S n = Market value at the end of year n
B n = Book value at the end of year n
O M n = O M cost during year n
t m = Marginal tax rate
(a) Determine the economic service life of the asset if i =12%.
(b) Determine the economic service life of the asset if i = 20%.
(c) Assume that i = 0 and determine the economic service life of the asset mathematically (i.e., use the calculus technique for finding the minimum point, as described in Chapter 8).