A school is considering buying a bus to provide transport facilities to its students in more locations. The bus can be purchased now for $200,000 and its salvage value at the end of 15 years will be $75,000. Annual operating and maintenance costs of the school bus are $150,000. Assume MARR is 8%. The school wants to know the capital recovery cost for the bus.

a) Which of the costs mentioned above should you include in your analysis for the capital recovery cost? Select all that apply.

Initial investment (P)

Salvage cost/value (F)

Annual operation and maintenance cost (A)

b) In a capital recovery problem, the cash outflows (costs) are denoted with a _______ sign while the cash inflows (profits) are denoted with a ________ sign.

Positive; positive

Negative; negative

Positive; negative

Negative; positive

c) What is the capital recovery cost for the bus? Round to the nearest dollar

d) Suppose the bus was sold after 20 years for $80,000. What is the capital recovery cost? Round to the nearest dollar.