Answered: An automaton asset with a high first…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

An automaton asset with a high first cost of
$10 million has required capital recovery (CR) of
$1,985,000 per year. The correct interpretation of
this CR value is that:
(a) the owner must pay an additional $1,985,000
each year to retain the asset.
(b) each year of its expected life, a net revenue of
$1,985,000 must be realized to recover the
$10 million first cost and the required rate of
return on this investment.
(c) each year of its expected life, a net revenue of
$1,985,000 must be realized to recover the
$10 million first cost.
(d) the services provided by the asset will stop if
less than $1,985,000 in net revenue is reported
in any year.

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