4.2. Comparison of Payback Periods for Loaders

Try these first

1. 1.

   What is depreciation?

   Hint

   Think about how old machines lose their value.

2. 2.

   Calculate the depreciation for a loader worth 28 lakh at a rate of 0.4.

   Hint

   Use the formula D = rate × book value.

3. 3.

   What is the formula for calculating depreciation?

   • D = rate × initial investment
   • D = rate + book value
   • D = rate × book value

   Hint

   Think about how we value machines over their lifespan.

4. 4.

   Is the economic life of a loader determined by its minimum cost?

   • True
   • False

   Hint

   Consider the relationship between usage and cost over time.

5. 5.

   Given a loader's purchase price of 30 lakh, a depreciation rate of 0.4, and an expected maintenance cost of 13 lakh in the first year, calculate the total annual cost for the first year. Then, discuss when it might be best to replace this loader based on cumulative costs over five years.

   Hint

   Chart out your annual costs each year and look for patterns.

6. 6.

   If a loader has reached its economic life as 7 years with a cumulative cost of 30 lakh against a new loader with minimal cost estimates of 25 lakh, devise a replacement strategy and justify your recommendation considering potential operational efficiencies.

   Hint

   Factor in both the immediate costs and long-term savings.