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5 cards from this section. Quick, good the night before a test.
Define investment costs in your own words.
Think about what expenses come with owning machinery.
What are two sources of investment costs?
Consider where the capital for machinery might come from.
What does investment cost refer to?
Focus on costs related to ownership.
True or False: The average annual investment method is the most precise method for calculating ownership costs.
Consider how each method accounts for timing.
A machine's purchase price is 150 lakhs, with a salvage value of 20 lakhs over its 15-year life. Use the AAI formula to calculate the average annual investment.
Follow the formula step by step.
If the total ownership cost calculation needs to include an average investment cost of 60 lakhs, insurance at 2%, taxes at 4%, and storage at 1.5%, calculate the total ownership cost for the year.
Multiply the average investment by the sum of percentages to find the costs.
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