4.7 - Calculating Other Components of Ownership Cost
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Practice Questions
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What is the Capital Recovery Factor used for?
💡 Hint: Think about cash flows and repayment schedules.
Define the term 'Ownership Cost.'
💡 Hint: Consider all costs related to asset ownership.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What is the primary purpose of the Capital Recovery Factor?
💡 Hint: Think about how loans are repaid over time.
True or False: Ownership Cost includes only the purchase price of the equipment.
💡 Hint: Consider maintenance, taxes, and other operational costs.
1 more question available
Challenge Problems
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A business owner plans to purchase a new machine for $250,000, which will last for 8 years. If the company expects to recover its investment with a yearly income of $50,000, what should be the required annual price considering a 10% interest rate?
💡 Hint: Make sure you incorporate the time value of money in your calculations.
If a piece of equipment has an estimated operation cost of $15,000 per year and you expect its residual value will be $20,000 at the end of its useful life of 5 years, calculate the total ownership cost.
💡 Hint: Don’t forget to include salvage values when calculating total ownership.
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