4 - Payback Period Method
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Practice Questions
Test your understanding with targeted questions
Calculate the depreciation for a machine with a purchase price of 20 lakh at a 40% rate.
💡 Hint: Use the formula: Depreciation = Purchase Price x Depreciation Rate.
What is book value at the end of the first year if the initial cost is 30 lakh and depreciation is 12 lakh?
💡 Hint: Subtract depreciation from initial cost.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What does the Payback Period Method measure?
💡 Hint: Think about what aspect of the investment the term 'payback' refers to.
True or False: The economic life of a machine is when operating costs start to decrease.
💡 Hint: Consider the context of machine replacement.
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Challenge Problems
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If a machine costs 40 lakh and has operating costs increasing each year while the projected profits increase less than the costs, determine the payback period considering both aspects.
💡 Hint: Keep track of both costs and revenues year by year.
Using specific values, compare two machines where one has a shorter payback period but lower economic life, and the other a longer payback but higher profits over time. Which should be chosen?
💡 Hint: Factor in the company's financial goals and cash flow situation.
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