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As an asset is kept longer, its capital recovery cost per year

  • A.falls
  • B.rises
  • C.stays constant
  • D.falls then rises again

Answer: A

Correct answer: falls

Capital recovery spreads the initial investment less the salvage over the years of service, so the more years there are the smaller the annual share. This is the force pulling towards keeping an asset longer, and it is opposed by the operating cost, which pulls the other way.

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