A machine which costs $100,000 when new, has a lifetime of 15 years and a salvage value of 20% of its original cost. If the interest rate is 10% compounded annually, what is the capital recovery cost?

October 5, 2019 - 2:21pm

#1
Rachelle Joy Co...

Capital recover cost

A machine which costs $100,000 when new, has a lifetime of 15 years and a salvage value of 20% of its original cost. If the interest rate is 10% compounded annually, what is the capital recovery cost?

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$F = P(1 + i)^n$

$F = 100,000(1 + 0.10)^{15}$

$F = \$417,724.82$

$R = 417,724.82 - 0.20(100,000)$

$R = \$397,724.82$

$A = \dfrac{Ri}{(1 + i)^n - 1}$

$A = \dfrac{397,724.82(0.10)}{(1 + 0.10)^{15} - 1}$

$A = \$12,518$