To improve package tracking at a ups transfer facility conveyor equipment was upgraded with rfid sensors at a cost of 6. the future market values are expected to decrease by 20% per year. the operating cost is expected to be 5000 in year 1 with increase of 3000 per year therafter. at an interest rate of 10% per year determine the ecnomic service life of the sensor if the maximum life is 6 years

Calculations below.

Explanation:

The economic service life is 3 years

This is because EUAC is minimized in year 3 at 22655.59

Annual costs are 5000, 8000, 11000, 14000, 17000 and 20000 for six years

Salvage value is 80% of 60000 = 48000 in year 1, 80% of 48000 = 38400 in year 2 and so on

PV of annual cost and salvage value is computed and net present value is computed by adding initial cost of 60000

Finally EUAC is computed using (A/P, i%, n).

Check the document attached to see the calculations

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