Practice Ownership Cost - 2.1 | 12. Equipment cost – Caterpillar and Peurifoy method | Construction Engineering & Management - Vol 1
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Knowledge

2.1 - Ownership Cost

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Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

Define ownership cost and list its components.

💡 Hint: Think about what costs are associated with simply owning the equipment.

Question 2

Easy

What is the Caterpillar method primarily used for?

💡 Hint: Consider which costs it simplifies in its calculations.

Practice 4 more questions and get performance evaluation

Interactive Quizzes

Engage in quick quizzes to reinforce what you've learned and check your comprehension.

Question 1

What is the first step in estimating ownership costs using the Caterpillar method?

  • Calculating insurance
  • Estimating depreciation
  • Finding the average value

💡 Hint: Remember, it's about the costs associated with ownership.

Question 2

True or False: The Peurifoy method does not consider the timing of cash flows.

  • True
  • False

💡 Hint: Think about what this method emphasizes.

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Challenge Problems

Push your limits with challenges.

Question 1

A company owns several pieces of construction equipment. Calculate the total ownership costs, given a total initial cost of $500,000 with a salvage value of $30,000 over 15 years. Consider that the average insurance expense is 2% of initial cost and taxes are 1.5%. Include these in your calculations.

💡 Hint: Don't forget to include all costs equally when summing up!

Question 2

A construction project requires an estimation of costs using both Caterpillar and Peurifoy methods on a piece of equipment that costs $200,000 with an expected salvage value of $20,000 over a usage period of 10 years. Discuss discrepancies in annual costs calculated between both methods and their implications.

💡 Hint: Utilize the cash factor importance relative to time valuation.

Challenge and get performance evaluation