Practice Third-Party Approach in Replacement Analysis - 1.5 | 19. Equipment Life and Replacement Analysis (Part 3) | Construction Engineering & Management - Vol 1
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1.5 - Third-Party Approach in Replacement Analysis

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Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

Define the third-party approach in replacement analysis.

💡 Hint: Think about who is evaluating the asset.

Question 2

Easy

What does the term sunk cost mean?

💡 Hint: Consider expenses that no longer affect your current 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 is the primary value considered in the third-party approach?

  • A) Historical Cost
  • B) Current Market Value
  • C) Book Value

💡 Hint: Think about what would matter to someone evaluating the asset today.

Question 2

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

  • True
  • False

💡 Hint: Consider what affects current decisions versus past expenses.

Solve 1 more question and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

A company invested $100,000 in a machine that now has a market value of $30,000 after five years. If future operating costs are expected to rise to $15,000 annually after year five, determine whether the company should replace the machine or not.

💡 Hint: Factor in ongoing costs versus what the machine could currently sell for.

Question 2

A contractor has a piece of equipment with a current fair market value of $25,000 and is expecting to incur repair costs of $18,000 in the next year. Analyze if replacement could be beneficial.

💡 Hint: Balance current value against looming expenses to decide.

Challenge and get performance evaluation