Question

Five years ago your company purchased some equipment for $125,000. The annual costs for operating and maintaining the equipment are $1500 a year and today's market value is $75,000 decreasing by 10% of original cost per year. What analysis can be done for the remaining life of this equipment and what is the value you would use for the next year if MARR = 12%?___ of $____

Answer 1

Purchase price of the equipment 5 years ago = $125,000

Todays market value of the equipment = $75,000

Decrease in its value per year = 10% of its original cost

= 10% of $125,000

= $12,500

.

Therefore, remaining life of the equipment = 75,000/12,500

= 6 years

.

.

The value that would be used next year if MARR is 12% = (75,000-12,500) - Present Value of annual costs for operating and maintaining the equipment

= $62,500 - 1,500*PVIFA(12%,5)

= $62,500 - 1,500*3.6048

= $57,092.80