This online quiz contains 7 questions. Click on the button next to the selection that best answers the question. To review your results, click on the Submit Answers button displayed after the last question. Good luck!
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1 | | In conducting a replacement analysis, the amount of money currently owed on the existing asset is used as its present value, not its original cost. |
| | A) | TRUE |
| | B) | FALSE |
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2 | | If the trade-in value of the currently-owned asset is higher than the asset's initial purchase price, the lower value should be used in the replacement analysis. |
| | A) | TRUE |
| | B) | FALSE |
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3 | | When the market value of a presently-owned asset is lower than its initial cost, the difference is treated as a sunk cost. |
| | A) | TRUE |
| | B) | FALSE |
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4 | | In conducting a replacement analysis over a specified planning horizon (study period), the horizon selected could be shorter, equal to, or longer than the remaining life of the currently owned asset. |
| | A) | TRUE |
| | B) | FALSE |
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5 | | If it is necessary to use the cash-flow approach in a replacement analysis (i.e., subtracting the trade-in value from the initial cost of the challenger), the remaining life of the defender must be the same as that of the challenger. |
| | A) | TRUE |
| | B) | FALSE |
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6 | | The economic service life (ESL) of an asset is determined by calculating its annual worth over different life periods and selecting the time coinciding with the lowest cost value. |
| | A) | TRUE |
| | B) | FALSE |
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7 | | If the market value of the defender is greater than the breakeven replacement value determined by equating the defender and challenger AW relations, keep the defender. |
| | A) | TRUE |
| | B) | FALSE |
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