2 - Parameters for Replacement Analysis
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Practice Questions
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What is economic life in terms of machinery?
💡 Hint: Think about the time frame in which holding costs are minimized.
What happens to costs after the economic life?
💡 Hint: Consider factors leading to additional expenses.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What does economic life refer to?
💡 Hint: Consider the cost-effectiveness aspect.
True or False: Costs significantly decrease as a machine ages.
💡 Hint: Think about the relationship between age and cost in machinery.
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Challenge Problems
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You have a machine that was purchased for ₹50,00,000, with expected depreciation calculated at a rate of 2,00,000 per year. If inflation increases replacement costs by 5% annually, calculate the projected cost of replacement in 5 years.
💡 Hint: Apply the compounding effect of inflation to the initial cost.
Analyze the opportunity cost of maintaining an older machine versus purchasing a new model. Consider aspects such as operational efficiency and capital investment.
💡 Hint: Think broadly about benefits and potential revenue loss.
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