1. What is the capital recovery per year for a machine that has an initial cost of $175,000 and a salvage value of 25% of the initial value over a 7 year life at an interest rate of 6% per year compounded yearly?
$36,560
$26,136
$23,511
$19,453
2. What is the annual capital recovery cost that you should charge your customers if the interest rate is 6.5% per year compounded yearly on a piece of machinery that you bought for $275,000 that is expected to last 10 years. The salvage that can be expected at the end of the machine life is 15% of the original value.
$25,674
$35,197
$38,765
$41,276