6.2 - Comparison of Methods
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Practice Questions
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What is the formula for converting initial costs into an annualized cost?
💡 Hint: Look for the capital recovery factor formula.
What does salvage value represent?
💡 Hint: Think about what is left of an asset after depreciation.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What is the purpose of the uniform series capital recovery factor?
💡 Hint: Focus on the term 'convert' in the context of costs.
True or False: Salvage value is always zero at the end of a machine's useful life.
💡 Hint: Think about whether anything of value can remain after use.
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Challenge Problems
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A construction firm has a heavy machine service life of 15 years with an initial cost of ₹25,00,000 and an expected salvage value of 10%. Calculate the annualized cost and the hourly depreciation if used for 2000 hours a year.
💡 Hint: First find the annualized cost using the recovery factor, then use these values to calculate hourly depreciation.
Assuming an interest rate of 7% and an initial cost of ₹1,00,00,000 for new machinery, find the total cost to own including an insurance rate of 1.5% over 10 years. Include all calculation steps.
💡 Hint: Apply the capital recovery factor and account for insurance in your calculations.
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