Practice Machine Details and Cash Flow Diagrams - 3.1 | 19. Equipment Life and Replacement Analysis (Part 3) | Construction Engineering & Management - Vol 1
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Knowledge

3.1 - Machine Details and Cash Flow Diagrams

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Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

Define the term 'Equivalent Annual Cost.'

💡 Hint: It involves annualizing all costs over the life of the equipment.

Question 2

Easy

What is meant by 'sunk costs'?

💡 Hint: Consider what expenses you can't reclaim or change.

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 main purpose of replacement analysis?

  • To minimize costs associated with old machinery
  • To maximize historical expenses
  • To ignore the time value of money

💡 Hint: Think about the financial aspects of maintaining versus replacing machinery.

Question 2

True or False: Sunk costs should influence future equipment replacement decisions.

  • True
  • False

💡 Hint: Consider how much you can regain from previous investments.

Solve 1 more question and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

A construction company evaluates two trucks: Truck A costs 50,000 initially with a maintenance cost of 4,000 yearly, while Truck B costs 70,000 with 3,000 yearly maintenance. Assume a resale value of 20,000 for Truck A after five years and 25,000 for Truck B after five years. Calculate the EAC for both trucks and identify which truck would be more economical considering a 10% interest rate.

💡 Hint: Use the formulas for Present Worth and Capital Recovery Factor effectively to find the answers.

Question 2

Discuss how ignoring market dynamics can significantly affect replacement analysis. Provide examples of cost implications when past values overshadow current pricing during decision-making.

💡 Hint: List potential risks in financial outcomes from poor analysis to flesh out your answer.

Challenge and get performance evaluation