When making replacement decisions, the development of relevant cash flows is complicated whencompared to expansion decisions, due to the need to calculate __________cash inflows.
A) non-conventional
B) conventional
C) initial
D) incremental

Question

Quizplus · Accepted Answer

When making replacement decisions, incremental cash flows need to be calculated because the cash flows are affected by the difference between the cash flows of the old asset and the new asset. Non-conventional and initial cash flows do not apply in this situation, and while conventional cash flows are relevant, they are not specific enough for replacement decisions.

When Making Replacement Decisions, the Development of Relevant Cash Flows