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2 cards from this section. Quick, good the night before a test.
What is the capital recovery factor used for?
Think about loan repayments.
Define salvage value.
Consider what happens to assets at the end of their lifespan.
What does the capital recovery factor help determine?
Focus on cash flows related to capital recovery.
True or False: The salvage value is the value of equipment at the start of its life?
Think about when an asset is being sold after use.
A company needs to replace a machine that has an estimated salvage value of $50,000 after 10 years. If they want to calculate how much to save each year to reach a total of $50,000 at an interest rate of 5%, what is the uniform annual saving amount?
Apply the sinking fund factor.
Calculate the annualized cost for a piece of equipment priced at $200,000 with a salvage value of $20,000 after 10 years with an interest rate of 8%.
Use the capital recovery factor in your calculations.
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