Equipment Service Life Assignment

(Annual Equivalent Analysis Approach)

(Free to share with attribution)

by Ted Robak

Problem: For the equipment cost data given below, develop a spreadsheet which calculates the after-tax annual equivalent over the eight year period, and identify the economic life of the machine.  Do the analysis two ways:

a)    treating the overhaul as a capital cost and

b)   treating the overhaul as an operating expense.

MARR= 8%

Tax Rate : 25%

CCA Rate (Mobile Equipment) = 30%