In a Decision to Keep or Replace Existing Equipment, ________

question 32

Multiple Choice

In a decision to keep or replace existing equipment, ________ is a FALSE statement.

• A)the book value of the old equipment is irrelevant
• B)the disposal value of the old equipment is irrelevant
• C)the cost of the new equipment is relevant
• D)depreciation on the new equipment is relevant

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Definitions:

Tax Rate

The percentage at which an individual or corporation is taxed.

Straight-Line Depreciation

A method of depreciating an asset at a fixed rate over its useful life, spreading the cost evenly across the period.

Useful Life

The estimated duration of time that an asset is expected to be productive for the purpose it was acquired for.

Annual Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue for a one-year period.