A hospital is considering the purchase of a new $40,000 diagnostic machine that

Question

A hospital is considering the purchase of a new $40,000 diagnostic machine that will have no salvage value after installation as the cost of removal equals any resale value. Maingtenance is estimated to be $2000 per year as long as the machine is owned. After 10 years the machine must be scrapped because the radioactive ion source will have caused so much damage to machine components that safe operation is no longer possible. The most economic life of this machine is : a. One year since it will have no salvage value after installation b. Less than 10 years, but more information is needed to determine the economic life. c. Forever because radio active decay never reaches zero although the intensity approaches zero as the time approaches infinity. d. Ten years because maintenance doesn't increase 8 points Question 5

Explanation / Answer

b. Less than 10 years, but more information is needed to determine the economic life

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