Practice Estimating Equivalent Annual Costs for Years - 3.2 | 19. Equipment Life and Replacement Analysis (Part 3) | Construction Engineering & Management - Vol 1
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Knowledge

3.2 - Estimating Equivalent Annual Costs for Years

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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 you measure costs annually.

Question 2

Easy

Define sunk cost.

💡 Hint: Consider costs that are no longer relevant to decision making.

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

Why is the timing of cash flows important in equipment replacement analysis?

  • It makes cash inflows larger
  • It allows for better estimation of future costs
  • It has no effect at all

💡 Hint: Recall how future costs are discounted to present value.

Question 2

True or False: Sunk costs should be considered in replacement decision-making.

  • True
  • False

💡 Hint: Think about costs that are no longer recoverable.

Solve 3 more questions and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

If a factory decides to retain an aging machine instead of replacing it, calculate the implications based on an expected increase in annual operating costs by 10% each year.

💡 Hint: Utilize the cash flow approach and take market value into account.

Question 2

A company owns a piece of machinery with a current market value of $25,000, a purchase cost of $100,000 with annual operating costs expected to double in the next five years. Discuss the appropriate replacement strategy.

💡 Hint: Focus on analyzing potential future costs to inform the decision.

Challenge and get performance evaluation