Managers evaluated using net book value will tend to replace assets sooner than will those managers in firms using gross book value.

Question

Quizplus · Accepted Answer

Managers evaluated using net book value have less incentive to replace assets sooner because the net book value decreases over time due to depreciation, making older assets appear less costly on the books compared to their original cost (gross book value), which does not decrease over time.

Managers Evaluated Using Net Book Value Will Tend to Replace