A company is deciding whether or not to replace some old equipment with new equipment.Which of the following is not considered in the incremental analysis?
A)annual operating cost of the new equipment
B)annual operating cost of the old equipment
C)net cost of the new equipment
D)book value of the old equipment

Question

Quizplus · Accepted Answer

The book value of the old equipment is not considered in the incremental analysis as it is a sunk cost and cannot be changed by the decision to replace or not. The other options (A, B, and C) are all relevant in determining the incremental cash flows associated with the decision to replace the equipment.

A Company Is Deciding Whether or Not to Replace Some