5.2 - Calculating Average Annual Investment
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Practice Questions
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What does investment cost represent?
💡 Hint: Think about what it costs to use a machine each year.
Name one factor that affects depreciation.
💡 Hint: Consider how long you've had an item.
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Interactive Quizzes
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What is the average annual investment method used for?
💡 Hint: Consider what 'average' implies in financial calculations.
True or False: Depreciation increases the value of equipment over time.
💡 Hint: Think about how long you keep equipment and what happens to its value.
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Challenge Problems
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A piece of equipment is purchased for $50,000 with a salvage value of $5,000 and is expected to last 15 years. Calculate the average annual investment.
💡 Hint: Use the provided formula to find the AAI.
If the ownership costs of a machine including insurance, taxes, and depreciation sum to $1,000 annually, what is the average investment per year if the average value of the machine is $20,000?
💡 Hint: Calculate the annual costs as a percentage to find out average outgoings.
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