A company is considering buying a new machine. Two different models are available on the market.
MARR is 10%.
Data Model-I Model-II
Useful Life , Years 20 25
First Cost, $ 80,000 100,000
Salvage Value, $ 20,000 25,000
Annual Oper. Costs, $ 18,000 15,000 for years 1 thru 10 and
20,000 for years 11 thru 25.
Note: The annual operating cost for Model-I is same ($18k) every year; but it varies for Model-II as described above.
a). Assuming sum-of-years digits depreciation, what book value will Model-I have after two years?