6.3: For the projects shown, what is the capital recovery cost? Project P Project Q Project...

6.3: For the projects shown, what is the capital recovery cost?

	Project P	Project Q	Project R	Project S	Project T	Project U
Initial Cost	($120,000)	($230,000)	($350,000)	($450,000)	($530,000)	($690,000)
Salvage value (% of IC)	20%	15%	-12%	16%	-11%	32%
Project life	3	4	5	6	7	9
Rate of interest (MARR)	12%	11%	14%	15%	13%	10%

Expert Solution

	Project P	Project Q	Project R	Project S	Project T	Project U
Initial Cost (I)	1,20,000	2,30,000	3,50,000	4,50,000	5,30,000	6,90,000
Salvage value (% of IC)	20%	15%	-12%	16%	-11%	32%
Salvage value(S)	24,000	34,500	-42,000	72,000	-58,300	2,20,800
Project life	3	4	5	6	7	9
Rate of interest (MARR)	12%	11%	14%	15%	13%	10%
Capital recovery factor (CRF)	0.4163	0.3223	0.2913	0.2642	0.2261	0.1736
Sinking fund factor (SFF)	0.2963	0.2123	0.1513	0.1142	0.0961	0.0736
a = (I*CRF)	49,961.88	74,135.06	1,01,949.24	1,18,906.61	1,19,838.73	1,19,811.97
b = (S*SFF)	7,112.38	7,325.26	-6,353.91	8,225.06	-5,603.26	16,259.83
Capital recovery cost (a-b)	42,849.50	66,809.80	1,08,303.15	1,10,681.55	1,25,441.99	1,03,552.14

jeff jeffy answered 2 years ago

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