A forklift can be purchased for 30000 The market value of th

A forklift can be purchased for $30,000. The market value of the forklift decreases by 20% of the previous year’s value for 2 years, and then by 15% in years 3 through 10. Maintenance is $400 in years 1 and 2, and then jumps to $750 in year 3. After year 3 the maintenance costs increase by $200/yr each year until year 1. Plot the marginal cost of this fork lift as a function of year. For full credit, show all work, complete a table on excel, and label the graph appropriately.  

Solution

Determine the Forklift\'s Purchase price=$3o,ooo.

Using the Double-Declining Balance Depreciation

For first 2 Years = Depreciable Value= $ 30,000

Annual Depriciation for 2 years= 30,000 X20% X2= $3000

For Third Year= $ 30,000- $3000=$ 27000-

Annual Depriciation for third year= $ 27000X 15%X10=$18000

Maintenance cost total=$2950.