Using factor method to solve this capital recovery cost problem:

Ten years ago, Johnson Recovery purchased a wrecker for $400, 000 to move disabled 18-wheelers. He received a salvage value of $30, 000 after 10 years of use. During this 10-year period, his average annual revenue totaled $70, 000.

a) Did he recover his investment at 12% per year return? In other words, does the Annual Equivalent Value of the benefits exceed the Capital Recovery cost at an interest rate of 12%?

b) Suppose Johnson moves, on average, 150 disabled 18-wheelers each year. What is his average equivalent benefit/cost per vehicle moved?

c) Now, incorporate annual operating and maintenance costs into your analysis. If the annual O&M cost was $5, 000 the first year and increased by a constant 10% per year, is the AW positive or negative at 12% per year?