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Practice Questions
Test your understanding with targeted questions related to the topic.
Question 1
Easy
What is the annual operating cost of the challenger?
💡 Hint: Look for the lowest annual cost between defender and challenger.
Question 2
Easy
Define what a sunk cost is.
💡 Hint: Think about costs that can no longer be altered.
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 defender?
- $135,000
- $90,000
- $600,000
💡 Hint: It's the higher of the two costs discussed.
Question 2
True or False: Sunk costs should be considered in replacement analysis.
- True
- False
💡 Hint: Remember what sunk costs represent.
Solve 1 more question and get performance evaluation
Challenge Problems
Push your limits with challenges.
Question 1
Given that the initial cost and book value of the defender are $3,800,000, what would be the sunk cost if the current trading value is $2,250,000?
💡 Hint: Sunk cost is only relevant to current losses, not future income.
Question 2
If the interest rate were to increase from 10% to 12%, recalculate the EAC for both equipment and determine the preferred option.
💡 Hint: Remember that increased rates affect future value definitions.
Challenge and get performance evaluation