4 - Depreciation and Book Value
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Practice Questions
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Define investment cost.
💡 Hint: Consider what expenses are involved in acquiring a machine.
What is depreciation?
💡 Hint: Think about how an asset's worth diminishes as it ages.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What does investment cost include?
💡 Hint: Think about both purchasing and financing aspects.
True or False: Depreciation increases the value of an asset over time.
💡 Hint: Consider the definition of depreciation.
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Challenge Problems
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A mining company has a machine with an initial cost of $250,000, a salvage value of $30,000 and a useful life of 10 years. Calculate the annual depreciation and the total ownership costs (with 10% investment cost, 3% insurance, 2% property tax, 1.5% storage).
💡 Hint: Break it down into parts.
A machine is purchased for $80,000, with a salvage value of $5,000 and a useful life of 7 years. Calculate the average annual investment and determine total ownership cost, including 9% investment cost, 2% insurance, 2.5% tax, and 1.2% storage.
💡 Hint: Use the formulas discussed.
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