6. Total Cost of Equipment

Try these first

1. 1.

   What is the formula for calculating annualized cost from the initial cost?

   Hint

   Consider the components: Initial cost, interest rate, and number of years.

2. 2.

   How do you calculate the salvage value of equipment?

   Hint

   Remember, it's a fraction of the initial cost.

3. 3.

   What is the annualized cost formula?

   • A) Initial Cost × [i(1+i)^n / ((1+i)^n - 1)]
   • B) Initial Cost + Salvage Value
   • C) Initial Cost / Years

   Hint

   Focus on how future payments relate to present costs.

4. 4.

   True or False: Salvage value is always a fixed percentage of the initial cost.

   • True
   • False

   Hint

   Think about how salvage relates to initial investment.

5. 5.

   An organization is estimating the annual cost of a heavy-duty truck with an initial cost of ₹1,20,00,000, a salvage value of 15% after 15 years with an interest of 10%. Calculate the total annual cost of ownership including depreciation.

   Hint

   Use the formulas for annualized costs and salvage values.

6. 6.

   A construction firm has a crane costing ₹90,00,000. After 10 years, it has a salvage value calculated at 10% of its initial cost. If the firm operates the crane for 1,200 hours annually, what is the hourly cost of operation, including depreciation and salvage value?

   Hint

   Deduct the salvage value and divide by operating hours.