The annual operating cost is expected to be constant

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An asset with a first cost of $250,000 is expected to have a maximum useful life of 10 years and a market value that decreases $25,000 each year. The annual operating cost is expected to be constant at $25,000 per year for 5 years and to increase at a substantial 25% per year thereafter. The interest rate is a low 4% per year, because the company, Public Services Corp., is majority-owned by a municipality and regarded as a semiprivate corporation that enjoys public project interest rates on its loans. (a) Verify that the ESL is 5 years. Is the ESL sensitive to the changing market value and AOC estimates?

Reference no: EM131378665

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