4.1 - Calculation of Investment Costs
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Practice Questions
Test your understanding with targeted questions
What is economic life in machinery?
💡 Hint: Think about when it's most cost-effective to use the machine.
How do you calculate depreciation using the double declining method?
💡 Hint: Remember to use the initial or previous year's book value.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What is the primary purpose of calculating economic life?
💡 Hint: Focus on efficiency and cost.
True or False: Depreciation increases the book value of an asset.
💡 Hint: Consider how assets are affected over time.
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Challenge Problems
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A construction company owns a crane with an initial cost of ₹50,00,000. If the salvage value is ₹10,00,000 after 10 years, calculate the annual depreciation using the double declining balance method. Show all steps.
💡 Hint: Use the formula provided for each year.
Consider a machine that has increased in costs annually at 5% due to inflation. If the purchase price was ₹40,00,000, what will its cost be at the end of the 5th year?
💡 Hint: Use the formula for compound interest to factor inflation.
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