3 - Working out a Problem for Economic Life
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Practice Questions
Test your understanding with targeted questions
What is replacement analysis?
💡 Hint: Focus on its purpose in financial decisions.
Define the term 'market value'.
💡 Hint: Think about how an asset's worth is evaluated today.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What is the primary goal of replacement analysis?
💡 Hint: Remember, it's about timing!
True or False: Sunk costs are relevant to future financial decisions.
💡 Hint: Focus on analyzing only current and future costs.
1 more question available
Challenge Problems
Push your limits with advanced challenges
A construction company is analyzing whether to replace a bulldozer bought for $200,000. It has an annual operating cost of $50,000. If its average resale value decreases to $90,000 after the first year, calculate the EAC and determine if it should be replaced.
💡 Hint: Use present worth factors to determine EAC over the useful life of the bulldozer.
A firm is deciding whether to keep an old crane with a persistent annual maintenance cost of $30,000. New models cost $150,000 with an expected annual operating cost of $10,000. Calculate EAC and discuss potential benefits.
💡 Hint: Consider running calculations over the crane’s anticipated useful life.
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