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The capital recovery component of an annual worth calculation accounts for the

  • A.first cost less salvage, recovered with interest
  • B.first cost alone, ignoring salvage
  • C.annual operating cost only
  • D.salvage value alone, ignoring first cost

Answer: A

The invested capital must be recovered and interest paid on it throughout, and the salvage receipt reduces what has to be recovered. The usual form multiplies the first cost less salvage by the capital recovery factor and adds interest on the salvage.

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