6.1 - Decision to Replace Defender with Challenger
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Practice Questions
Test your understanding with targeted questions
What is the operating cost of the Challenger?
💡 Hint: Look for the cost associated with maintaining the Challenger.
What is a sunk cost?
💡 Hint: Think about costs that are irrelevant to future decisions.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What is the operating cost of the Defender?
💡 Hint: Focus on the comparison costs mentioned.
True or False: The salvage value of the Challenger is more favorable than that of the Defender.
💡 Hint: Look for the ending values after five years.
2 more questions available
Challenge Problems
Push your limits with advanced challenges
Given the Defender's initial cost of Rs. 22,50,000 and a remaining useful life of 5 years, calculate the total cost of ownership if retained and compare it to the Challenger's costs.
💡 Hint: Use total operational cost + next salvage value to ascertain which is lower.
Discuss how ignoring sunk costs affects decision-making in a financial context. Provide an example where this principle can be applied outside machinery.
💡 Hint: Consider projects that may require additional funding despite previous spending.
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