A self-employed worker operates a firewood-splitting service. He purchased a commercial-grade wood splitter for $5800. He used $400 of business capital and financed the balance at 5% per year for 3 years. The estimated values of the splitter for the next 6 years are $2200 after the first year of ownership, decreasing by $400 per year to year 5, after which the resale value remains at $600. Annual operating costs are expected to be $1000 the first year, increasing by 10% each year thereafter. He considers keeping the splitter at least 6 years. If money is worth 7% per year, for how many years should the splitter be retained?
(Perform the Economic Minimum Life analysis for at least 12 years.)
Please provide the following:
1. Cash flow diagram
2. A representative EUAW equivalency equation using Standard Notation corresponding to the CFD
3. The Excel spreadsheet and output
4. Excel created graphs from the results