1. If the operating costs for an asset are S500 x 2" and the capital costs are $10 000 x (0.8)", where n is the life in years, what is the economic life of the asset?
2. A roller conveyor system used to transport cardboard boxes along an order-filling line costs Si00 000 plus S20 000 to install. It is estimated to depreciate at a declining-balance rate of 25% per year over its 15-year useful life. Annual maintenance costs are estimated to be $6000 for the first year, increasing by 20% every year thereafter. In addition, every third year, the rollers must be replaced at a cost of $7000. Interest is at 10%.
(a) Construct a spreadsheet that has the following headings: Year, Salvage Value, Maintenance Costs, EAC(Capital Costs), EAQMaintenance Costs), and EAC(Total Costs). Compute the EACfTotal Costs) if the conveyor were to be kept for n vears, ;?=!,... , 15
(b) Construct a chart showing the EAC(Capital Costs), EAC(Maintenance Costs), and EAC(Total Costs) if the conveyor were to be kept for n years, n = 1,... , 15.
(c) What is the economic life of the roller conveyor system?