Practice Equipment Life and Replacement Analysis (Part 3) - 1.1 | 19. Equipment Life and Replacement Analysis (Part 3) | Construction Engineering & Management - Vol 1
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1.1 - Equipment Life and Replacement Analysis (Part 3)

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Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

What does EAC stand for?

💡 Hint: Think about how we relate costs annually.

Question 2

Easy

Why are sunk costs irrelevant in replacement analysis?

💡 Hint: Consider what past costs mean for the future.

Practice 4 more questions and get performance evaluation

Interactive Quizzes

Engage in quick quizzes to reinforce what you've learned and check your comprehension.

Question 1

What is the Equivalent Annual Cost (EAC)?

  • A method for cost escalation
  • An annualized cost figure reflecting total ownership costs
  • A measure of salvage value

💡 Hint: Reflect on how this aids in making informed decisions.

Question 2

True or False: Sunk costs should be considered in replacement analysis.

  • True
  • False

💡 Hint: Remember the definition of sunk costs.

Solve 3 more questions and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

You have a piece of machinery that costs $80,000 with the following operating costs: $15,000 in year one, increasing by $2,000 each subsequent year. If the salvage value is projected to be $20,000 after five years and your discount rate is 10%, how would you calculate the EAC to determine optimal replacement timing?

💡 Hint: Use a financial calculator for accurate present value computations.

Question 2

Consider a scenario where a defender shows consistent maintenance costs but a challenger, though more expensive upfront, has lower ongoing costs. Analyze the financial implications of maintaining the defender versus investing in the challenger.

💡 Hint: Run a break-even analysis to find the crossover point in costs.

Challenge and get performance evaluation