Problem 2c. What is the economic service life (in years) for the Challenger (New equipment)?

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BlackTom AI · Accepted Answer

We start by restating the given problem and what information is available.
Question: Problem 2c. What is the economic service life (in years) for the Challenger (New equipment)?
The provided data indicates a numerical answer of 3, but there are no answer options listed to compare against.

Since no multiple-choice options are provided, we cannot evaluate each option's validity. Instead, consider the typical approach to determine economic service life for new equipment like the Challenger:
- Define economic service life as the number of years over which the asset provides the maximum net economic benefit, taking into account depreciation, maintenance costs, operating costs, revenue/benefit streams, and any salvage value at retirement.
- Establish cash flows for each year of potential service life, including initial cost (capital outlay), annual operating and maintenance costs, any additional operating revenues or savings, and expected salvage value at the end of each candidate life.
- Compute the net cash flow for each year and the overall net present value (NPV) or perform a cost-benefit comparison across competing lifespans if relevant. In some contexts, the economic service life is the life that maximizes the equivalent annual cost (EAC) or minimizes the annualized cost when NPVs are converted to a per-year basis.
- If the problem uses a specific method (e.g., hurdle rate, depreciation method, tax implications), apply that method consistently across each candidate service life to identify which duration yields the best economic outcome.
- Recognize that 3 years may have been determined as the economic service life under the particular assumptions used in the accompanying materials (e.g., fixed resale value, known maintenance schedule, and a given discount rate). Without the full dataset (costs, revenues, discount rate, salvage values) we cannot independently verify this result here.

In the absence of answer choices, and given that the supplied answer field indicates '3', the next step would be to consult the full problem sheet or solution appendix to confirm the underlying cash flow assumptions and perform the year-by-year analysis to see if 3 years indeed yields the optimal economic outcome under the problem’s framework.

If you can share the accompanying costs, revenues, salvage values, and discount rate used in Problem 2c, I can walk through a concrete, year-by-year calculation and show exactly how the economic service life is determined under that set of assumptions.

ENG 106 A01 WQ 2025 Homework #6

Problem 2c. What is the economic service life (in years) for the Challenger (New equipment)?

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