The answer is economic life.
The period of time over which an improvement to the property will contribute to its value is known as its economic life.
What is economic life?
- The estimated span of time that an asset will be beneficial to the average owner is referred to as its economic life.
- When an asset is no longer beneficial to its owner, it is said to have reached the end of its economic life. The economic life of an asset may differ from its physical life.
- Owners must consider the asset's net present value (NPV), internal rate of return (IRR), and return on investment when estimating the figure (ROI). Several causes can shorten or end an asset's economic life. Asset wear, deterioration, or damage diminishes the economic life of an asset.
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