Please show the steps to answer question a, the correct answer is the "economic life of asset A is 3 years, and the economic life of asset B is 6 year". Ignore part b and c, Thank you The following pair of assets differ only in the MARR. The problem asks you to determine the effect of this difference on the economic life and to explain the result. All assets decline in value by 20 percent of current value eachyear. Installation costs are zero for all assets. Further data concerning the four pairs of assets are given in the table that follows.Initial OperatingRate of OperatingFirst Cost$125,000$125.000AssetCostCost Increase$30,000$30,00013.5%/year13.5%lyearMARR5%25%A.a. Determine the economic lives for assets A and B.b. Create a diagram showing the EAC(capital), the EAC(operating), and the EAC(total) for assets A and B.c. Explain the difference in economic life between A and B.Click the icon to view the table of compound interest factors for discrete compounding periods when i= 5%.a. The economic life of asset A isyears, and the economic life of asset B isyears.(Type whole numbers.)

ANSWER(C) The economic life of an asset is the period of time during which it remains useful to its…

Answered: ase show the steps to answer question…

ase show the steps to answer question a, the correct answer is the "economic life of asset A is 3 years, and the economic life of asset B is 6 year". Ignore part b and c, Thank you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 9P

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Question

Please show the steps to answer question a, the correct answer is the "economic life of asset A is 3 years, and the economic life of asset B is 6 year". Ignore part b and c,

Thank you

The following pair of assets differ only in the MARR. The problem asks you to determine the effect of this difference on the economic life and to explain the result. All assets decline in value by 20 percent of current value each
year. Installation costs are zero for all assets. Further data concerning the four pairs of assets are given in the table that follows.
Initial Operating
Rate of Operating
First Cost
$125,000
$125.000
Asset
Cost
Cost Increase
$30,000
$30,000
13.5%/year
13.5%lyear
MARR
5%
25%
A.
a. Determine the economic lives for assets A and B.
b. Create a diagram showing the EAC(capital), the EAC(operating), and the EAC(total) for assets A and B.
c. Explain the difference in economic life between A and B.
Click the icon to view the table of compound interest factors for discrete compounding periods when i= 5%.
a. The economic life of asset A is
years, and the economic life of asset B is
years.
(Type whole numbers.)

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