5.1. Key Points on Time Value Method

Try these first

1. 1.

   What does the Uniform Series Capital Recovery Factor help you calculate?

   Hint

   Think about budgeting for loans.

2. 2.

   Define salvage value.

   Hint

   Consider what the item can be sold for after use.

3. 3.

   What does the Uniform Series Capital Recovery Factor allow you to determine?

   • The total cost of a loan
   • Equal annual payments to recover capital
   • The future value of an investment

   Hint

   Think about capital recovery and budgeting.

4. 4.

   True or False: Depreciation is not a factor in estimating ownership costs.

   • True
   • False

   Hint

   Remember what depreciation accounts for.

5. 5.

   A company buys a machine for 60 lakhs at an interest rate of 10% and expects to sell it for 8 lakhs after 5 years. Calculate the annual depreciation and the annualized cost of ownership.

   Hint

   Track both the depreciation and the annual payments required.

6. 6.

   Calculate the annual payments needed to recover 100 lakhs over 20 years at an interest rate of 6%.

   Hint

   Ensure you're clear on the values for P, i, and n while applying the formula.