Practice Salvage Value Conversion To Eac For Challenger (5.3) - Introduction to Defender and Challenger Equipment

Practice: Salvage Value Conversion to EAC for Challenger

Lesson 5.3Introduction to Defender and Challenger Equipment

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9 questions

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Exercise
6 questions · about 4 min · pass mark 70%. Hints available.
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Quiz
3 questions · about 2 min · pass mark 70%. Hints available.
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6 sample questions

Question 1.
What does EAC stand for?
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It's a term we use to compare costs over an asset's life.
Question 2.
Why should sunk costs be ignored in our analysis?
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Think about the costs already spent.
3Question 3.
What is the primary purpose of calculating EAC?
- To determine depreciation
- To estimate annual costs of equipment
- To find the salvage value
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Consider why you'd want to see costs in a yearly perspective.
4Question 4.
Sunk costs should influence your decision about keeping or replacing equipment.
- True
- False
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Think about whether these costs can be changed now.
Question 5.
A company has two cranes: Crane A with an EAC of 7,00,000 and Crane B with an EAC of 5,50,000. If the interest rate doubles, calculate how the EAC might change for both cranes assuming similar cash flows.
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Consider how higher interest rates affect annuity values.
Question 6.
Given the challenger has an initial cost of 27,50,000 and an operating cost of 90,000, evaluate how much more the annual cost would be if the salvage value drops to 10,00,000 after 5 years compared to the current salvage estimate of 12,00,000.
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Calculate the difference in EAC based on the changed salvage value.

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