Discussion
Match the cost component with how it behaves as an asset ages.
1. Capital recovery per year 2. Operating and maintenance per year 3. Their sum
P. Rises Q. Falls R. Passes through a minimum
Answer: B
Correct answer: 1-Q, 2-P, 3-R
Two opposing trends and their resultant. Capital recovery falls as the investment is spread over more years; operating and maintenance costs rise as the asset ages; and their sum, falling at first and rising later, passes through a minimum. That minimum is the economic service life.
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