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Book Value of Equipment Is Irrelevant in Equipment-Replacement Decisions

question 39

True/False

Book value of equipment is irrelevant in equipment-replacement decisions.


Definitions:

External Costs

Costs resulting from an economic activity that affects third parties who did not choose to incur that cost.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Interest Rate

Rate at which one can borrow or lend money.

Decline

A decrease in quantity, quality, or strength over a period, often observed in economic indicators, stock prices, or physical capacities.

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