Practice Summary of Replacement Analysis Principles - 7.1 | 21. Introduction to Defender and Challenger Equipment | Construction Engineering & Management - Vol 1
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Knowledge

7.1 - Summary of Replacement Analysis Principles

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Learning

Practice Questions

Test your understanding with targeted questions related to the topic.

Question 1

Easy

What is replacement analysis?

💡 Hint: Think about the decision-making process in budgeting.

Question 2

Easy

Define sunk cost.

💡 Hint: Consider the costs of past investments.

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 should be ignored in replacement analysis?

  • Current market value
  • Sunk costs
  • Operating costs

💡 Hint: These costs have already occurred.

Question 2

True or False: The equivalent annual cost accounts for future cash flows discounting.

  • True
  • False

💡 Hint: Think about how future expenses relate to present finances.

Solve and get performance evaluation

Challenge Problems

Push your limits with challenges.

Question 1

A company has an old machine with an annual operating cost of 1,35,000 and a current market value of 22,50,000. After 5 years, it will have a salvage value of 6,00,000. If a new machine has an operating cost of 90,000 and a market value of 12,00,000 after 5 years, compare both using EAC and recommend an actionable decision.

💡 Hint: Compare calculated EAC values.

Question 2

Evaluate two construction machines: one has high operational costs but a significant salvage value while another is cheaper upfront with lower operational costs. How would you decide using replacement analysis?

💡 Hint: Determine the economic life for accurate comparison.

Challenge and get performance evaluation