1.1 - Understanding Investment Cost
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Practice Questions
Test your understanding with targeted questions
What does investment cost represent?
💡 Hint: Think about how investments may lead to costs.
Define depreciation.
💡 Hint: Consider how wear and tear affects value.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What does investment cost refer to?
💡 Hint: Consider all costs of capital.
True or False: The average annual investment method is more precise than the time value method.
💡 Hint: Think about method accuracy and errors.
1 more question available
Challenge Problems
Push your limits with advanced challenges
A construction company is evaluating two different types of machinery. Machine A costs $80,000 to purchase and has an anticipated resale value of $10,000 after 10 years. Machine B costs $100,000 with a resale value of $20,000 after the same period. How does the average annual investment cost compare for each machine assuming a depreciation of straight line?
💡 Hint: Calculate using average values over the lifespan of the machinery.
You are considering purchasing an equipment set worth $150,000 with a salvage value of $25,000 expected to last for 15 years. If you use the time value method with a cost of capital of 5%, what are the total costs involved?
💡 Hint: First find depreciation, then add possible costs from investment income missed.
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