Practice Next Lecture Preview (7.3) - Introduction to Defender and Challenger Equipment

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Lesson 7.3Introduction to Defender and Challenger Equipment

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9 questions

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6 sample questions

Question 1.
What is the definition of a defender in terms of replacement analysis?
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Recall which term refers to your existing machinery.
Question 2.
Explain what a sunk cost is.
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Think about old expenses and decision making.
3Question 3.
What is considered when doing a replacement analysis?
- Only initial costs
- Current market values and ongoing costs
- Sunk costs
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Focus on what matters for today, not yesterday.
4Question 4.
Is it acceptable to include sunk costs in replacement analysis?
- True
- False
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Think about costs you cannot recover.
Question 5.
A company has a defender with an annual operating cost of 1,35,000 and a remaining life of 5 years. It can be sold for 6,00,000. If a challenger has an operating cost of 90,000 and costs 27,50,000, calculate the equivalent annual costs and recommend a course of action.
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Remember to apply the right formulas for CRF and SFF in your calculations.
Question 6.
Discuss a situation where retaining a defender might be favorable despite its costs, ensuring to quantify potential benefits.
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Explore qualitative benefits that factor into decision-making.

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