2.2. Uniform Series Capital Recovery Factor

Try these first

1. 1.

   What does USCRF stand for?

   Hint

   Think about the role it plays in cost calculations.

2. 2.

   What is a sunk cost?

   Hint

   Consider what you would overlook in future decisions.

3. 3.

   What is the primary purpose of the Uniform Series Capital Recovery Factor?

   • To calculate depreciation
   • To find equivalent annual costs
   • To assess total equipment lifespan

   Hint

   Focus on how financial metrics connect to recurring expenses.

4. 4.

   True or False: Sunk costs should be a primary consideration in future business decisions.

   • True
   • False

   Hint

   Think about costs you cannot get back.

5. 5.

   A piece of construction equipment was bought for $80,000, expected to last 12 years. Operating costs are$5,000 yearly. After year five, it can be sold for $25,000. Calculate its EAC for its first 12 years.

   Hint

   Don’t forget to adjust for the market change at year five.

6. 6.

   An investment in machinery leads to $10,000 in annual savings when upgraded. If the upgrade costs$15,000 and expected lifespan is 10 years, determine if the machine should be upgraded if the discount rate is 8%.

   Hint

   Look back at the formulas you've learned to calculate the present value.