4.2 - Finding Book Value at Different Years
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Practice Questions
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Define the term 'Cost of Investment'.
💡 Hint: Think about the connection between investment and machinery.
What is depreciation?
💡 Hint: Consider how equipment ages and loses value.
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Interactive Quizzes
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Which method accounts for the timing of cash flows in calculating investment costs?
💡 Hint: Consider which method is more precise.
True or False: The cost of investment can only be calculated if equipment is purchased with borrowed funds.
💡 Hint: Think about different ways of acquiring equipment.
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Challenge Problems
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A company buys machinery for $500,000 with a salvage value of $100,000 and a useful life of 8 years. Calculate the annual depreciation using the straight-line method.
💡 Hint: Use the difference between the initial cost and salvage value.
If an equipment’s average annual investment comes out to be $60,000, and the total ownership costs include depreciation of $15,000, insurance of $3,000, taxes of $1,500, and storage costs of $1,000, calculate the hourly ownership cost based on an annual operating time of 2000 hours.
💡 Hint: Sum all costs and then divide by the annual operating hours.
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