Practice Capital Recovery Calculation (2.5) - Equipment Life and Replacement Analysis (Part 3)

Practise this section

9 questions

Flashcard drill
3 cards from this section. Quick, good the night before a test.
Exercise
6 questions · about 4 min · pass mark 70%. Hints available.
Sign up to start the exercise
Quiz
3 questions · about 2 min · pass mark 70%. Hints available.
Sign up to start the quiz

5 sample questions

Question 1.
Define Equivalent Annual Cost (EAC).
Show hintHide hint
What does EAC facilitate in decision-making?
Question 2.
What is a sunk cost?
Show hintHide hint
Think about costs from past decisions.
3Question 3.
What is considered when estimating EAC?
- Initial price
- Salvage value
- Operational costs
- All of the above
Show hintHide hint
Think about everything that affects total costs.
4Question 4.
Can sunk costs affect your future investment decisions?
- True
- False
Show hintHide hint
Consider what influence past costs have on present decisions.
Question 5.
You have an old loader purchased for $45,000 with a salvage value of $8,000. Operating costs begin at $3,500 per year, and increase by $500 annually. Compute the EAC for year 1 and year 2. Determine in which year the loader should ideally be replaced based on your findings.
Show hintHide hint
Be sure you understand how operating costs are increasing over the years.

5 more questions in this section. Enroll free to practise them all.