Use the Following Information for Questions
Chung Inc If the Old Equipment Is Replaced Now, It Can Be

question 143

Multiple Choice

Use the following information for questions
Chung Inc. is considering the replacement of a piece of equipment with a newer model. The following data has been collected: $\begin{array}{lrr}&\text { Old Equipment}&\text { New Equipment }\\\text { Purchase price } & \$ 225,000 & \$ 375,000 \\\text { Accumulated depreciation } & 90,000 & -0- \\\text { Annual operating costs } & 300,000 & 240,000\end{array}$ If the old equipment is replaced now, it can be sold for $60,000. Both the old equipment's remaining useful life and the new equipment's useful life is 5 years.
-Which of the following amounts is irrelevant to the replacement decision?

• A) $375,000
• B) $135,000
• C) $315,000
• D) $60,000

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Definitions:

Positive Utility

The benefit or satisfaction gained from the consumption of goods or services that contribute to an individual's well-being and happiness.

Availability Heuristic

A mental shortcut that relies on immediate examples that come to mind when evaluating a specific topic, concept, method, or decision, which can lead to biases.

Framing Effect

The cognitive bias where people react differently to a particular choice depending on how it is presented, such as a loss or gain.

High-End Retailers

Retail outlets that focus on selling premium products and services, often associated with luxury or top-quality items.