5.2. FOG Cost Estimation

Try these first

1. 1.

   What is the formula for calculating the equivalent uniform annual cost?

   Hint

   Think about how interest and time factor in.

2. 2.

   Define salvage value.

   Hint

   Consider what happens to equipment when it's no longer useful.

3. 3.

   What is the annualized cost formula?

   • Cost + Interest
   • Initial Cost x [i(1+i)^n / ((1+i)^n - 1)]
   • Initial Cost / Life Span

   Hint

   Which option incorporates interest?

4. 4.

   The salvage value represents the future resale value of a piece of equipment.

   • True
   • False

   Hint

   Think about when you'd sell equipment.

5. 5.

   A construction project has machinery with an initial cost of ₹4,50,00,000. The salvage value is estimated at 10% of the initial cost. Calculate the annualized initial cost over a 10-year lifespan at a 6% interest rate.

   Hint

   Work through the formula step by step: calculate exponentials, then multiply.

6. 6.

   If the total ownership cost totals ₹2,500,00 and the operational costs add up to ₹1,500,00 for a month of work, what is the total cost for that project?

   Hint

   Add together all monthly expenditures for total project assessment.