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5 cards from this section. Quick, good the night before a test.
What does investment cost include?
Think about borrowed funds and potential returns.
What are the two primary methods of calculating ownership costs?
Recall the methods discussed.
What is the purpose of the time value method?
Remember, timing is key in financial decisions.
The average annual investment method expresses ownership costs as a percentage of what?
Think about the lifespan of the equipment.
A construction firm buys a machine for $300,000 with annual depreciation of $30,000 and has to pay $3,000 in insurance and $5,000 in taxes annually. Calculate the total ownership cost per year.
Add each of the relevant costs together.
Using the AAI method, determine the average annual investment for a machine initially purchased for $400,000, expecting a salvage value of $80,000 over 8 years.
Apply the formula for calculating AAI carefully.
6 more questions in this section. Enroll free to practise them all.
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