1.5 - Third-Party Approach in Replacement Analysis
Enroll to start learning
You’ve not yet enrolled in this course. Please enroll for free to listen to audio lessons, classroom podcasts and take practice test.
Practice Questions
Test your understanding with targeted questions
Define the third-party approach in replacement analysis.
💡 Hint: Think about who is evaluating the asset.
What does the term sunk cost mean?
💡 Hint: Consider expenses that no longer affect your current decisions.
4 more questions available
Interactive Quizzes
Quick quizzes to reinforce your learning
What is the primary value considered in the third-party approach?
💡 Hint: Think about what would matter to someone evaluating the asset today.
True or False: Sunk costs should be included in replacement analysis.
💡 Hint: Consider what affects current decisions versus past expenses.
1 more question available
Challenge Problems
Push your limits with advanced challenges
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.
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.
Get performance evaluation
Reference links
Supplementary resources to enhance your learning experience.