Enrol to start learning
Reading is open to everyone. Enrolling is free, and it is what unlocks the audio lessons, practice tests and progress tracking.
7. Cost of Investment
The chapter discusses the various components of ownership costs for machinery, focusing on the cost of investment as a key factor in determining overall ownership costs. It highlights two main methods for calculating investment costs: the time value method and the average annual investment method. Additionally, the chapter covers related costs like insurance, taxes, and storage, concluding with an example to illustrate how to estimate the ownership costs.
Sections
The cost of investment represents the annual capital cost associated with owning machinery, which can include both borrowed and company-owned funds.
The ownership cost comprises several vital components, including investment cost, insurance, taxes, and storage costs necessary for machinery ownership.
This section discusses the methods to calculate ownership costs associated with equipment investment, focusing on investment cost, insurance, taxes, and storage costs.
This section covers the cost of investment in machinery, its depreciation, and the methods for calculating ownership costs.
This section discusses the components of ownership costs, particularly focusing on investment costs and how to estimate them using various methods.
This section covers the estimation of ownership costs related to equipment, focusing on methods of calculating investment costs and their components such as depreciation, insurance, and taxes.
Ownership costs consist of depreciation, investment cost, insurance, taxes, and storage costs.
The average annual investment method provides an approximate estimation for ownership costs.
Investment costs can be based on both borrowed funds and company assets, influenced by interest rates.
Cost of Investment
The annual cost associated with capital invested in machinery, including considerations of interest rates whether borrowed or from company assets.
Time Value Method
A method of calculating investment costs that accounts for cash flows occurring at different times by converting them to a present value.
Average Annual Investment Method
An approximate method used to estimate the cost of investment based on the average value of machinery over its useful life.
Ownership Costs
Costs that encompass depreciation, investment costs, insurance, taxes, and storage related to machinery ownership.
Practice Exercises
Total Questions
2
Estimated Time
4 min
Passing Score
70%
Instructions
- Read each question carefully
- You can use hints if you need help
- Complete all questions before submitting
Get your answers marked and your progress tracked
Enrol free