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Practice Questions
Test your understanding with targeted questions related to the topic.
Question 1
Easy
What is considered an operating cost?
💡 Hint: Think about daily running costs.
Question 2
Easy
What does salvage value represent?
💡 Hint: It's like the final price when selling something used.
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 annual operating cost of the challenger?
- 90,000
- 135,000
- 100,000
💡 Hint: Look back to the initial costs mentioned.
Question 2
Is the defender's initial cost relevant in the replacement analysis?
- True
- False
💡 Hint: Consider which costs are current versus past.
Solve 2 more questions and get performance evaluation
Challenge Problems
Push your limits with challenges.
Question 1
A piece of machinery has a purchase price of 50,000 with an annual operating cost of 10,000 and salvage value of 5,000 after 4 years. If the interest rate is 6%, compute the EAC.
💡 Hint: Use formulas for Pv and annualize them.
Question 2
Scenario: Two machines have the following details: Machine A costs 25,000, with operating costs of 3,000, salvage at 2,000 over 5 years; Machine B costs 20,000, with 2,500 operating and 1,500 salvage value. Which machine is preferable and why, based on EAC?
💡 Hint: Focus on annualizing those costs.
Challenge and get performance evaluation