Consider a facility that has a 30-year life, a replacement cost of $1 million, and an interest rate of 5%.
a. Calculate the animalization factor. Show your work/ calculations using the formula.
b. Based on the animalization factor, calculate the annual cost of the facility.
c. To implement the project, new equipment is purchased at $15,000 which has a useful life of 10 years. Using the animalization factor at 4% interest rate, what is the equipment’s annual depreciation cost?