4.5 - Calculating Annualized Salvage Value
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Practice Questions
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What is the capital recovery factor used for?
💡 Hint: Think about loan repayments.
Define salvage value.
💡 Hint: Consider what happens to assets at the end of their lifespan.
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Interactive Quizzes
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What does the capital recovery factor help determine?
💡 Hint: 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?
💡 Hint: Think about when an asset is being sold after use.
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Challenge Problems
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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?
💡 Hint: 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%.
💡 Hint: Use the capital recovery factor in your calculations.
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