4.1 - Calculating Depreciation
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Practice Questions
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What is depreciation?
💡 Hint: Think about what happens to a car's value after a few years.
What are two components of investment costs?
💡 Hint: Consider both borrowed money and money you could have invested.
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Interactive Quizzes
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What does depreciation refer to?
💡 Hint: Think about your car's value as it ages.
True or False: Investment costs only refer to loans taken for purchasing machines.
💡 Hint: Consider if there are other factors to account for.
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Challenge Problems
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Calculate the total ownership cost for a piece of machinery with a purchase price of $100,000, salvage value of $10,000, a useful life of 10 years, with investment cost at 7%, insurance at 3%, taxes at 2%, and storage at 1%. Assume the average annual investment method.
💡 Hint: Work systematically through each component and sum them up for total ownership cost.
If the average annual investment method gives you an average investment of $45,000 for a machine, and ownership costs account for 12% of that value. What would those ownership costs be?
💡 Hint: You just need to calculate a percentage of the average investment value.
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