In Order to Make a Replacement Decision When the Defender

question 5

Multiple Choice

In order to make a replacement decision when the defender and the challenger are identical, one should assume that

• A)the economic lives of the assets are very long relative to the planning time horizon.
• B)the technology can be changed during the economic life of an asset.
• C)the relative price and interest rate vary over time.
• D)the replacement decision is repeated an indefinitely large number of times.
• E)the defender and the challenger are made using different technologies.

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Definitions:

Equity

Equity represents an owner's share in the assets of a company, after all liabilities have been subtracted.

Accounts Receivable

The balance of money owed to a company by its customers for goods or services delivered or used but not yet paid for.

Credit

An entry recording an increase in assets or decrease in liabilities and equity on the company’s balance sheet, or the provision of goods or services in exchange for a promise of payment in the future.

Equity

The value of an ownership interest in property, including shareholders' equity in a company, represented by the assets minus liabilities.