4. Investment Costs

Try these first

1. 1.

   What is economic life?

   Hint

   Think about the duration of cost-effectiveness!

2. 2.

   List one component of investment costs.

   Hint

   Consider what is included in total costs related to machines.

3. 3.

   What does economic life refer to?

   • The total lifespan of a machine
   • Period with minimal operating costs
   • The price of the machine

   Hint

   It's about when costs are lowest while operating the machine.

4. 4.

   True or False: Obsolescence costs increase as technology advances.

   • True
   • False

   Hint

   Consider how technology affects value over time.

5. 5.

   A company purchases a machine for 40,00,000 and incurs yearly maintenance costs of 3,00,000 that increases by 5% annually. Calculate the total maintenance cost after three years.

   Hint

   Remember to apply the 5% increase for each subsequent year.

6. 6.

   Discuss how changes in technology might influence the decision to replace a machine with respect to obsolescence.

   Hint

   Tie this back to how consumer demand impacts machinery value.