Question
You invest in a piece of equipment costing $40.000. The equipment will be used for two years, at the end of which time the salvage
You invest in a piece of equipment costing $40.000. The equipment will be used for two years, at the end of which time the salvage value of the machine is expected to be $15,000. 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. If your interest rate is 10%.
A. What is the capital recovery cost?
a. $17,263
b. $15,905
c. $13,441
d. $19,210
B. What is the annual recovery cost?
a. $21,915
b. $15,623
c. $17,809
d. $19,321
C. What would be the net savings generated per machine hour?
a. $4.961 savings per machine per hour
b. $3.596 savings per machine per hour
c. $5.583 savings per machine per hour
d. $2.163 savings per machine per hour
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