Acquisition Cost

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Definition of 'Acquisition Cost'

Acquisition cost is the total cost of acquiring an asset, including the purchase price and any costs associated with making the asset ready for use. For example, if you buy a car, the acquisition cost would include the purchase price of the car, as well as any taxes, title fees, and licensing fees.

The acquisition cost of an asset is important because it is used to calculate the asset's depreciation. Depreciation is the gradual decrease in the value of an asset over time. The acquisition cost is used as the starting point for calculating depreciation, and the depreciation expense is deducted from the asset's value each year.

The acquisition cost of an asset can also be used to calculate the asset's return on investment (ROI). ROI is a measure of the profitability of an investment, and it is calculated by dividing the net profit from the investment by the acquisition cost of the investment.

In general, the acquisition cost of an asset is an important factor to consider when making an investment decision. The higher the acquisition cost, the longer it will take for the asset to generate enough profit to cover the cost of the investment.

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