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Number obtained quickly by using the capital recovery factor

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A new machine tool costs $15,000 and has a $5000 salvage value at the end of 5 years. The interest rate is 10 percent. The annual cost of capital recovery is the annual depreciation charge (use straight-line depreciation) plus the equivalent annual interest charge. Work this out on a year-by-year basis and show that it equals the number obtained quickly by using the capital recovery factor.

Reference no: EM132481490

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