Allied & ICAR Exam Bank • ALLIED_2940 MCQ • 1 Mark

Section 2: Farm Machinery

Farm Machinery

Subtopic: Cost analysis of implements and tractors

Question Statement:

Annual interest on investment for agricultural machinery is standardly computed on:

Options:

  • (A) Average investment value $\frac{P + S}{2}$
  • (B) Initial purchase price $P$ throughout the entire lifespan
  • (C) Salvage value $S$ only
  • (D) Zero interest

Answer Key:

A

Step-by-Step Solution & Explanation

Interest is charged on the mid-life average capital tied up in the asset: $\frac{P + S}{2} \times i$.
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