7.1. Overview of Equipment Cost Estimation

Try these first

1. 1.

   What does the uniform series capital recovery factor help us determine?

   Hint

   Think about how loans are typically repaid.

2. 2.

   What is the ownership cost of equipment?

   Hint

   Includes depreciation, taxes, and operational costs.

3. 3.

   What is the capital recovery factor used for?

   • Estimating depreciation
   • Loan repayment
   • Operating cost

   Hint

   Consider what happens when a loan is repaid.

4. 4.

   True or False: The ownership cost includes only the purchase price of the equipment.

   • True
   • False

   Hint

   Think about all costs you might incur over time.

5. 5.

   An irrigation system costs $100,000. If the project's lifespan is 15 years and interest is 4%, calculate the annual payment needed to recover the initial investment. How might this affect future budgeting?

   Hint

   Use the formula for annual payments based on the capital recovery factor.

6. 6.

   You need $50,000 for a future project in 10 years. If you can earn 5% interest on your savings, how much should you save annually to reach this goal?

   Hint

   Apply the sinking fund formula to find your annual deposit.