Practice Calculating Average Annual Investment (5.2) - Cost of Investment

Practice: Calculating Average Annual Investment

Lesson 5.2Cost of Investment

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9 questions

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4 cards from this section. Quick, good the night before a test.
Exercise
6 questions · about 4 min · pass mark 70%. Hints available.
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Quiz
3 questions · about 2 min · pass mark 70%. Hints available.
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6 sample questions

Question 1.
What does investment cost represent?
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Think about what it costs to use a machine each year.
Question 2.
Name one factor that affects depreciation.
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Consider how long you've had an item.
3Question 3.
What is the average annual investment method used for?
- An accurate cash flow estimate
- An approximate way to calculate investment costs
- A method to determine equipment rental rates
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Consider what 'average' implies in financial calculations.
4Question 4.
True or False: Depreciation increases the value of equipment over time.
- True
- False
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Think about how long you keep equipment and what happens to its value.
Question 5.
A piece of equipment is purchased for $50,000 with a salvage value of $5,000 and is expected to last 15 years. Calculate the average annual investment.
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Use the provided formula to find the AAI.
Question 6.
If the ownership costs of a machine including insurance, taxes, and depreciation sum to $1,000 annually, what is the average investment per year if the average value of the machine is $20,000?
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Calculate the annual costs as a percentage to find out average outgoings.

5 more questions in this section. Enroll free to practise them all.