A tractor shovel has a purchase price of Rs. 4.7 lacs and could save the organization an amount of rupees one lac per year on operating costs. The salvage value after the amortization period is 10% of the purchase price. The capital recovery period will be A. 3.7 years B. 4.23 years C. 5 years D. 7.87 years

The correct answer is A. 3.7 years.

The capital recovery period is the number of years it takes to recover the initial investment in a project. In this case, the initial investment is Rs. 4.7 lacs and the annual savings are Rs. 1 lac. Therefore, the capital recovery period is 4.7 lacs / 1 lac = 4.7 years.

Option B is incorrect because it is the annual savings divided by the annual depreciation. The annual depreciation is not the same as the annual savings.

Option C is incorrect because it is the purchase price divided by the annual savings. The purchase price is not the same as the annual savings.

Option D is incorrect because it is the purchase price divided by the annual depreciation plus the salvage value. The annual depreciation is not the same as the annual savings, and the salvage value is not relevant to the capital recovery period.