Chapter D, Problem 119P

To determine

The replacement of a typical existing asset (defender) that is beyond its minimum economic life with a new asset (Challenger) should be done when.

1. It should never be done because the existing asset is working.
2. The defender’s marginal cost is greater than the challengers equivalent annual cost
3. The challengers average future cost becomes less than existing asset
4. The defender’s equivalent annual cost equals the challengers equivalent annual cost.