Practice Payback Period Method (4) - Depreciation Calculation - Construction Engineering & Management - Vol 1

Practice: Payback Period Method

Lesson 4Depreciation Calculation

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8 questions

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6 sample questions

Question 1.
Calculate the depreciation for a machine with a purchase price of 20 lakh at a 40% rate.
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Use the formula: Depreciation = Purchase Price x Depreciation Rate.
Question 2.
What is book value at the end of the first year if the initial cost is 30 lakh and depreciation is 12 lakh?
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Subtract depreciation from initial cost.
3Question 3.
What does the Payback Period Method measure?
- Cost of depreciation
- Time to recover investment
- Annual profit
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Think about what aspect of the investment the term 'payback' refers to.
4Question 4.
True or False: The economic life of a machine is when operating costs start to decrease.
- True
- False
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Consider the context of machine replacement.
Question 5.
If a machine costs 40 lakh and has operating costs increasing each year while the projected profits increase less than the costs, determine the payback period considering both aspects.
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Keep track of both costs and revenues year by year.
Question 6.
Using specific values, compare two machines where one has a shorter payback period but lower economic life, and the other a longer payback but higher profits over time. Which should be chosen?
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Factor in the company's financial goals and cash flow situation.

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