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 relevant to the decision of whether to replace it or not. Incremental analysis only considers future costs and benefits that will change as a result of the decision. The book value is a historical cost and does not affect future cash flows.

A Company Is Deciding Whether or Not to Replace Some