Depreciation of assets
The attached file contains a worked example from a textbook. Explain it.
Neglecting income taxes and assuming an interest rate of 0%, calculations for determining the most economic replacement interval are as follows.
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...st $10,000 initially, you get $6,000 for selling it at the end of the year, and it cost $3,000 to operate. Therefore,
-10,000+6,000-3,000 = -$7,000 cost for one year, or an average annual cost of $7,000.
If you kept the machine 2 years, it costs $10,000 initially, you get $3,000 for selling it at the end of year 2, and it costs a total of $6,500 to ...