6. Summary of Ownership Cost Estimation

Try these first

1. 1.

   Define investment cost in your own words.

   Hint

   Think about the basis of costs incurred for equipment ownership.

2. 2.

   List two components of ownership cost.

   Hint

   Consider the expenses that recur over time with machinery.

3. 3.

   What does investment cost represent?

   • A) The annual cost of financing machinery
   • B) The purchase price of the machinery
   • C) The total operational cost

   Hint

   Reflect on what future costs are derived from investments.

4. 4.

   True or False: The average annual investment method is typically more accurate than the time value method.

   • True
   • False

   Hint

   Consider the factors involved in each method's calculation.

5. 5.

   A heavy construction machine costs $500,000 and has an expected lifespan of 10 years. If it has a salvage value of$50,000, calculate its annual depreciation using the straight-line method.

   Hint

   Consider the total depreciation spread over the lifespan.

6. 6.

   Company X purchases a crane for $200,000, incurs 2$25,000 annually. Calculate the total ownership cost after one year.

   Hint

   Ensure to calculate percentages accurately based on equipment value.