A new bottle-capping machine costs S45 000, including S5000 for installation. The machine is expected to have a useful life of eight years with no salvage value at that time (assume straight-line depreciation). Operating and maintenance costs are expected to be S3000 for the first year, increasing by SI000 each year thereafter. Interest is 12%.
(a) Construct a spreadsheet that has the following headings: Year, Salvage Value, Maintenance Costs, EAC(Capital Costs), EAC(Operating Costs), and EACfTotal Costs). Compute the EAC(Total Costs) if the bottle capper is kept for n years, n = 1,... , 8.
(b) Construct a chart showing the EAC(Capital Costs), EAC(Operating Costs), and EACfTotal Costs) if the bottle capper were to be kept for n vears, n = 1, . . . , 8.
(c) What is the economic life of the bottle capper?