Consider a facility that has a 30-year life, a replacement cost of $2 million, and an interest rate of 5%.
a. Calculate the annualization factor. Show your work/ calculations using the formula.
b. Based on the annualization factor, calculate the annual cost of the facility.
c. To implement the project, a new equipment is purchased at $15,000 which has a useful life of 10 years. Using the annualization factor at 4% interest rate, what is the equipment’s annual depreciation cost?