SRI RAMAKRISHNA ENGINEERING COLLEGE
DEPARTMENT OF ELECTRONICS AND COMMUNICATION ENGINEERING
ACTIVE LEARNING METHOD REPORT :20ME225 - Economic For Engineers
INTRODUCTION
The Capital recovery with return is a
financial concept that helps investors determine
the time it will take to recover their initial
investment in a project, along with any returns
earned from the investment. This calculation is
essential for investors to evaluate the
profitability of a project and make informed
investment decisions. By using the capital
recovery with return formula, investors can
determine the breakeven point of their
investment, which is the point at which the
initial investment is fully recovered, including
any returns earned. This information can help
investors decide whether to invest in a
particular project or pursue other investment
opportunities.
Capital Recovery With Return
Capital recovery with return is a financial
calculation used to determine the length of
time required to recover the initial investment
in a project, taking into account any expected
returns on that investment. The calculation is
used to determine the breakeven point for a
project, or the point at which the investment
has been fully recovered. The capital recovery
with return formula takes into account the
initial investment, the expected return on
investment, and the period of time over which
the investment is made. The formula calculates
the number of years it will take for the investor
to recover their initial investment, taking into
account any returns earned during that time.
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TITLE :Capital Recovery With Return
Calculation ➢ Time Value of Money: Capital recovery
➢ Investment Appraisals: Capital recovery
with return can be used to evaluate with return calculations do not account for
The formula for capital recovery with
investment opportunities by determining the time value of money, which means that
return is as follows:
the payback period, net present value, future cash flows are not discounted to
Capital Recovery with Return = Initial
internal rate of return, and profitability reflect their present value. As a result,
Investment / Annual Return + Years
index. These metrics help to determine future cash flows may be overestimated,
leading to overly optimistic expectations of
Initial Investment is the amount of money whether an investment will be profitable
and provide a reasonable return on the investment's profitability.
invested at the beginning of the project
investment. ➢ Changing Market Conditions: Market
Annual Return is the expected return on
➢ Cost Analysis: Capital recovery with conditions can change rapidly, making it
investment each year
return can also be used to analyze the costs difficult to accurately predict the future
Years is the number of years over which the
associated with a project or investment cash flows and returns on an investment.
investment is made
opportunity. By calculating the amount of Changes in interest rates, inflation rates,
For example, if an investor puts Rs 100,000
capital that needs to be recovered, and market competition can all impact the
into a project with an expected return of 10%
companies can identify the break-even investment's profitability and may require
per year, and expects to recover their initial
point and determine whether the project is adjustments to the capital recovery with
investment in 5 years, the capital recovery with
financially viable. return calculation.
return calculation would be:
➢ Pricing: Capital recovery with return can ➢ Complexity: Capital recovery with return
be used to determine the minimum price calculations can become complex and time-
Capital Recovery with Return = Rs 100,000 /
that must be charged for a product or consuming, particularly when multiple
(Rs 100,000 x 10%) + 5 = 10 + 5 = 15 years
service in order to recover the costs of investments or projects are being evaluated.
This complexity can make it challenging for
This means that it will take the investor 15 producing it, as well as to generate a profit.
investors to accurately assess the
years to recover their initial investment, taking This approach helps companies to set
profitability of different investment options.
into account the annual return earned on the prices that are both competitive and
investment. profitable.
CONCLUSION
Benefits Of Capital Recovery To conclude capital recovery with return,
Problems In Capital Recovery
This approach is often used to determine it's important to regularly monitor the
While capital recovery with return can be a
the minimum price that must be charged for a investment to ensure that it is meeting its
useful financial tool for evaluating
product or service in order to recover the costs financial targets and generating the expected
investment opportunities, there are also
of producing it, as well as to generate a profit. return. It may also be necessary to adjust the
several potential problems and challenges
investment strategy over time to ensure
that can arise when using this approach.
The use of capital recovery with return continued success.The main goal of capital
Some of the common problems in capital
can be seen in various financial calculations recovery with return is to ensure that an
recovery with return include:
and analyses, including: investment generates enough revenue to cover
➢ Assumptions: Capital recovery with
its initial cost and also provide a positive return
return calculations often rely on a series of
on investment.
assumptions, such as the expected rate of
return, the useful life of the investment,
PRESENTED BY :
and the inflation rate. If these assumptions
turn out to be inaccurate, the capital Paveen S G (2002140)
recovery with return calculation may be Raaj Kishor R H (2002151)
significantly off and can result in incorrect
decisions.