Question

The machines shown below are under consideration for an improvement to an automated candy bar wrapping process.

	Machine C	Machine D
First cost, $	–40,000	–75,000
Annual cost, $/year	–15,000	–10,000
Salvage value, $	12,000	25,000
Life, years	3	6

(Source: Blank and Tarquin)

Based on the data provided and using an interest rate of 5% per year, the Capital Recovery “CR”of Machine D is closest to:

(All the alternatives presented below were calculated using compound interest factor tables including all decimal places)

CRd = -$11,101

CRd = -$18,452

CRd = -$24,776

CRd = -$14,777

Based on the data provided and using an interest rate of 5% per year, the Annual Worth “AW” of Machine D is closest to:

(All the alternatives presented below were calculated using compound interest factor tables including all decimal places)

AWd = -$220,630

AWd = -$29,611

AWd = -$21,101

AWd = -$12,071

Answer 1

Capital Recovery of machine D (CRd) =       -$11,101

Annual Worth of Machine D (AWd) =          -$21,101

Please find below table useful to compute the desired results: -