3 - Equivalent Annual Cost Calculation for Defender
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Practice Questions
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What is the operational cost of the Defender?
💡 Hint: Refer to the section where the operating costs were introduced.
Define salvage value.
💡 Hint: Think about how equipment can still have some value after it is no longer used.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What is the operating cost of the Challenger?
💡 Hint: Look at how costs were mentioned for both machines.
True or False: Sunk costs should be considered in replacement decisions.
💡 Hint: Remember the definition and implications of sunk costs.
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Challenge Problems
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Analyze how a sudden increase in maintenance costs for the Defender (to INR 2,00,000 per year) would affect the decision-making process compared to Challenger.
💡 Hint: Utilize the updated operating cost in your calculation.
Determine how inflation might shift the salvage values over a 5-year period for both equipment, leading you to propose a different financial strategy.
💡 Hint: Consider using a percentage increase for annual salvage values.
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