You want to invest in a machine that costs $55.000. The machine will be used for...

 

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You want to invest in a machine that costs $55.000. The machine will be used for 5 years and will have a salvage value of $20,000. The machine will be used for 4,000 hours in year 1, 5000 hours in year 2, 6000 hours in year 3, 7000 hours in year 4, and 8000 hours in year 5. The machine also requires 1000 dollars of preventive maintenance per year. The expected yearly savings associated with the use of the piece of equipment will be $30,000. Your interest rate is 10%. A. What is the capital recovery cost? (3P) i III B. What is the annual equivalent worth? (3P) I iii III C. What is net savings generated per machine-hour? (4P) You want to invest in a machine that costs $55.000. The machine will be used for 5 years and will have a salvage value of $20,000. The machine will be used for 4,000 hours in year 1, 5000 hours in year 2, 6000 hours in year 3, 7000 hours in year 4, and 8000 hours in year 5. The machine also requires 1000 dollars of preventive maintenance per year. The expected yearly savings associated with the use of the piece of equipment will be $30,000. Your interest rate is 10%. A. What is the capital recovery cost? (3P) i III B. What is the annual equivalent worth? (3P) I iii III C. What is net savings generated per machine-hour? (4P)

Answer rating: 100% (QA)

a To calculate the capital recovery cost we need to determine the annual cost of recovering the init... View the full answer