When Replacing an Old Asset with a New One, the Original

question 53

Multiple Choice

When replacing an old asset with a new one, the original purchase price of the old asset represents:

• A)relevant cost.
• B)differential costs.
• C)opportunity cost.
• D)sunk cost.

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Definitions:

Business Risk

The potential for financial loss in operating a business, arising from factors such as changes in market demand, costs, competition, and regulatory environment.

Entrepreneurs

Individuals who start, organize, and manage new business ventures, taking on financial risks in the hope of profit.

Earthquake Insurance

A type of property insurance that covers damage to a building and its contents caused by seismic activities.

Tolerance for Risk

The degree to which an individual or organization can withstand risk, particularly in investment, without experiencing adverse effects.