An air pollution control device was installed with an expected equipment life of 5 years. The capital investment was $1,550,000. 1) What is the capitol recovery cost of the control device with an interest rate of 7%? 2) If $50,000 salvage value is expect

1) The capital recovery cost of the control device can be calculated by using the following formula: Capital recovery cost = (Capital investment x Annual interest rate factor) + (Annual operating cost – Depreciation) Annual interest rate factor can be calculated using the following formula: Annual interest rate factor = (Interest rate x (1 + Interest rate)^Equipment life) / ((1 + Interest rate)^Equipment life – 1) Substituting the values into the formula, we get: Annual interest rate factor = (0.07 x (1 + 0.07)^5) / ((1 + 0.07)^5 – 1) = 0.2004 Capital recovery cost = (1,550,000 x 0.2004) + (0 – 0) = $310,080 Therefore, the capital recovery cost of the control device with an interest rate of 7% is $310,080. 2) The annual depreciation value can be calculated using the straight-line method, which is calculated as follows: Annual depreciation value = (Capital investment – Salvage value) / Equipment life Substituting the values into the formula, we get: Annual depreciation value = (1,550,000 – 50,000) / 5 = $300,000 Therefore, the annual depreciation value according to the straight-line method is $300,000.