A new forklift truck will require an investment of $30,000 and is expected to have year-end MVs and annual expenses as shown in columns 2 and 5, respectively, as shown in the Table. If the before-tax MARR is 10% per year, how long should the asset be retained in service? Solve by hand and by spreadsheet.
![TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4)<br>(4)<br>Cost of<br>(6)<br>[= (3) + (4) + (5)]<br>Total (Marginal)<br>Cost for Year<br>(3)<br>(7)<br>EUAC<br>through<br>Year k<br>(5)<br>Loss in Market Capital = 10%<br>(1)<br>(2)<br>End of MV, End<br>Annual<br>Value (MV)<br>Year, k of Year k during Year k<br>of Beginning Expenses<br>(Ek)<br>of Year MV<br>(TCx)<br>$30,000<br>1<br>22,500<br>$7,500<br>$3,000<br>$3,000<br>$13,500<br>$13,500<br>2<br>16,875<br>5,625<br>2,250<br>4,500<br>12,375<br>12,964<br>3<br>12,918 N* = 3<br>12,750<br>9,750<br>4,125<br>1,688<br>7,000<br>12,813<br>4<br>3,000<br>1,275<br>10,000<br>14,275<br>13,211<br>5<br>7,125<br>2,625<br>975<br>13,000<br>16,600<br>13,766<br>a EUAC; = E TC;(P/F, 10%,j)|(4/P, 10%, k)<br>2j=l<br>](https://s3.us-east-1.amazonaws.com/storage.unifolks.com/qimg-008/008_66vwxp0-uphycrbf.png)
Extracted text: TABLE 9-2 Determination of the Economic Life, N*, of a New Asset (Example 9-4) (4) Cost of (6) [= (3) + (4) + (5)] Total (Marginal) Cost for Year (3) (7) EUAC through Year k (5) Loss in Market Capital = 10% (1) (2) End of MV, End Annual Value (MV) Year, k of Year k during Year k of Beginning Expenses (Ek) of Year MV (TCx) $30,000 1 22,500 $7,500 $3,000 $3,000 $13,500 $13,500 2 16,875 5,625 2,250 4,500 12,375 12,964 3 12,918 N* = 3 12,750 9,750 4,125 1,688 7,000 12,813 4 3,000 1,275 10,000 14,275 13,211 5 7,125 2,625 975 13,000 16,600 13,766 a EUAC; = E TC;(P/F, 10%,j)|(4/P, 10%, k) 2j=l