Practice Average Annual Investment Method - 3.1 | 7. Cost of Investment | Construction Engineering & Management - Vol 1
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Knowledge

3.1 - Average Annual Investment Method

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Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

Define investment cost in your own words.

💡 Hint: Think about whether the money used could earn returns elsewhere.

Question 2

Easy

What does Average Annual Investment Method aim to estimate?

💡 Hint: Consider the relationship between the machine's value and its lifecycle.

Practice 4 more questions and get performance evaluation

Interactive Quizzes

Engage in quick quizzes to reinforce what you've learned and check your comprehension.

Question 1

What does the Average Annual Investment Method estimate?

  • Cost of loan
  • Machinery ownership cost
  • Maintenance cost

💡 Hint: Consider the financial aspect of owning machinery.

Question 2

True or False: The Average Annual Investment Method calculates specific cash flows.

  • True
  • False

💡 Hint: Reflect on how this method functions in estimation.

Solve 1 more question and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

If a construction firm has a piece of machinery purchased at $150,000, with an expected life of 10 years and a salvage value of $15,000, calculate the Average Annual Investment and discuss how ownership costs would be affected over its lifecycle.

💡 Hint: Use the AAI formula carefully and reflect on the implications of these costs over time.

Question 2

Discuss the financial implications of not accounting for potential salvage value in the Average Annual Investment Method calculation.

💡 Hint: Think about the impact of accurate vs. inaccurate cost assessments.

Challenge and get performance evaluation