The Equivalent Annual Cost Considers Which of the Following

question 47

Multiple Choice

The equivalent annual cost considers which of the following?
I.required rate of return
II.operating costs
III.need for replacement
IV.economic life

• A)I and II only
• B)II and IV only
• C)II, III, and IV only
• D)I, II, and IV only
• E)I, II, III, and IV

---

Definitions:

Renovation Expense

Costs incurred in updating or restoring the physical condition of a business asset to increase its value or extend its life.

Straight-Line Depreciation

A method of calculating the depreciation of an asset which assumes the asset will lose an equal amount of value each year over its useful life.

Operating Expenses

are the costs involved in running a business that are not directly tied to the creation of a product or service, such as rent, utilities, and administrative salaries.

Cash Sales

Transactions where payment for goods or services is made at the time of sale in cash or its equivalent.