6.1. Upcoming Lecture Focus on Time Value

Try these first

1. 1.

   What is depreciation?

   Hint

   Think about what happens to items like machines and vehicles over years.

2. 2.

   What is book value?

   Hint

   Consider its original purchase price and how it declines.

3. 3.

   What is the depreciation for a machine valued at 2.8 million rupees with a rate of 0.4?

   • 1.12 million
   • 1.68 million
   • 2.8 million

   Hint

   Use the formula for depreciation.

4. 4.

   True or False: The economic life of machinery is the period during which it remains profitable.

   • True
   • False

   Hint

   Consider the meaning of profitability in relation to time.

5. 5.

   If a machine initially costs 4 million rupees with a depreciation rate of 0.2, calculate its book value after three years.

   Hint

   Remember to subtract annual depreciation each year from the previous year's book value.

6. 6.

   Using the maximum profit method, if the annual profit from a machine drops by 100,000 annually and was 1 million in the first year, how long before it reaches economic life?

   Hint

   Think about the downward trend and calculate when profit will no longer justify the machine's costs.