1.1. Book Value Calculation for First Year

Try these first

1. 1.

   What is the initial book value of the machine?

   Hint

   Remember the purchase price of the machine.

2. 2.

   Calculate the first year depreciation for a machine costing 28,00,000.

   Hint

   Use the formula: Depreciation = 0.4 x Book Value.

3. 3.

   What is the first year depreciation calculated based on a machine with a book value of 28,00,000 rupees?

   • 8,00,000
   • 11,20,000
   • 12,00,000

   Hint

   Use the provided formula for depreciation.

4. 4.

   The book value at the end of the first year is?

   • True
   • False

   Hint

   Review how book value is calculated.

5. 5.

   If a machine that had an initial value of 28,00,000 rupees has annual operational costs rising by 10% each year, and depreciation remains constant, calculate how long until operating costs exceed depreciation.

   Hint

   Consider performing a year-by-year evaluation for clarity.

6. 6.

   Explain the difference in decision-making between minimum cost and maximum profit methods in machinery replacement.

   Hint

   Use scenarios to illustrate when to implement each method.