5.2 - Ownership Cost Calculation According to Peurifoy
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Practice Questions
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What are the components of ownership costs?
💡 Hint: Think about what costs you would incur beyond just buying a piece of equipment.
How is depreciation calculated?
💡 Hint: Remember the equation you learned — Initial Cost minus Salvage Value.
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Interactive Quizzes
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What does ownership cost include?
💡 Hint: Think about all costs associated with owning and running equipment.
Is depreciation considered in operating cost calculations?
💡 Hint: Remember the definitions we discussed earlier.
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Challenge Problems
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Calculate the total cost for a piece of equipment with a purchase price of 500,000, having operating costs of 60 per hour, expected to be used for 2,000 hours annually over 10 years, with a salvage value at 20%.
💡 Hint: Start by determining annual depreciation before summing it up with operating costs.
Apply both Caterpillar and Peurifoy methods on a dump truck with a purchase price of 3 crores. Discuss key differences in estimates produced.
💡 Hint: Understand how each method approaches the timing of cash flows and expenses.
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