You invest in a piece of equipment costing $40,000. The equipment will be used for two years, and it will be worth $15,000 at the end of two years. The machine will be used for 4,000 hours during the first year and 6,000 hours during the second year. The expected savings associated with the use of the piece of equipment will be $28,000 during the first year and $40,000 during the second year.
Your interest rate is 10%.
(a) What is the capital recovery cost?
(b) What is the annual equivalent worth?
(c) What is net savings generated per machine-hour?