1.2. Estimating Equivalent Uniform Annual Cost

Try these first

1. 1.

   What is the Capital Recovery Factor used for?

   Hint

   Think about loan repayments and recovery of investments.

2. 2.

   Define Equivalent Uniform Annual Cost.

   Hint

   Consider annual costs versus total costs.

3. 3.

   What is the primary purpose of the Capital Recovery Factor?

   • To calculate future value
   • To determine loan repayments
   • To assess project profitability

   Hint

   Focus on financial repayments associated with loans.

4. 4.

   True or False: Ownership costs include depreciation, taxes, and loan repayments.

   • True
   • False

   Hint

   Consider what costs are tied to owning a piece of equipment.

5. 5.

   A construction company buys a bulldozer for 500,000, expecting to sell it for 50,000 after 10 years. If the interest rate is 8%, calculate the annualized cost of the bulldozer.

   Hint

   First, calculate the capital recovery factor before plugging values into the annual cost formula.

6. 6.

   An equipment has an initial cost of 1,200,000 with 2% yearly increase in operating costs over 15 years. Calculate the total operating cost over its lifetime.

   Hint

   Consider the compounding factors while calculating each year separately.