Practice Important Points in Replacement Analysis - 1.4 | 19. Equipment Life and Replacement Analysis (Part 3) | Construction Engineering & Management - Vol 1
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1.4 - Important Points in Replacement Analysis

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Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

What is the primary focus of the third-party perspective in replacement analysis?

💡 Hint: Think about what matters to an outsider evaluating the machine.

Question 2

Easy

Define what a sunk cost is in the context of replacement analysis.

💡 Hint: Consider costs that don't impact future decisions.

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 should be the primary focus in replacement analysis according to the third-party perspective?

  • Initial purchase cost
  • Current market value
  • Book value in accounting records

💡 Hint: Think about what information influences current decisions.

Question 2

True or False: Sunk costs are essential for future financial decisions.

  • True
  • False

💡 Hint: Recall how past costs affect current decisions.

Solve 2 more questions and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

Consider two machines: Machine A purchased for 10,00,000 with a current value of 4,00,000 and increasing maintenance costs versus Machine B costing 5,00,000 with lower operational costs. Evaluate whether to replace Machine A with Machine B, assuming similar resale values.

💡 Hint: Evaluate the trade-offs in operational efficiency and cost before making a decision.

Question 2

You have an old excavator bought for 15,00,000, now worth 3,00,000. It incurs annual operating costs of 2,00,000, but a new one at 12,00,000 with operating costs of 1,00,000. Calculate EAC for both and determine the better option.

💡 Hint: Remember to incorporate the time value of money in your calculations.

Challenge and get performance evaluation