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3 cards from this section. Quick, good the night before a test.
Define economic life.
What is the purpose of determining economic life?
What is depreciation?
Think about asset value and how it changes.
What is the economic life of a machine?
Think about the costs associated with machines.
True or False: Obsolescence costs become more significant as a machine ages.
How does technology affect older machines?
A machine is purchased at 50,00,000 and is expected to last 10 years with an annual maintenance cost that increases by 5% each year. Calculate the total estimated costs for the first three years.
Start with the initial cost and consider each subsequent year’s maintenance.
If a machine has an obsolescence factor that increases by 2% per year, and starts at 0%, what will the obsolescence cost be at the end of 5 years, assuming its initial value is 30,00,000?
Remember to contribute the percentage over the five years to determine the total.
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