Question: A particular machine costs $ 125,000 upfront. Legislation prevents the machine from being used for more than 5 years. If sold for scrap at that time it would be worth $5,000. If sold previously then it will be worth $5,000 plus $12,000 per year of remaining legal use. Running and ownership costs are expected to be $60,000 in the first year, and increase by $16,000 each year thereafter. The discount rate to be used is 11%. Your task is to determine the economic life of the machine. Answer to the nearest dollar. Your sign convention for this question should be such that costs are positive.

Cost per year for 1 year:

Cost per year for 2 years:

Cost per year for 3 years:

Cost per year for 4 years:

Cost per year for 5 years:

Economic life in years:

Price: $2.99

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