What role does a trade-in allowance on old equipment play in a decision to retain or replace equipment?
A)it is relevant since it increases the cost of the new equipment
B)it is not relevant since it reduces the cost of the old equipment
C)it is not relevant to the decision since it does not impact the cost of the new equipment
D)it is relevant since it reduces the cost of the new equipment

Question

Quizplus · Accepted Answer

The trade-in allowance on old equipment is relevant to the decision to retain or replace equipment because it reduces the cost of the new equipment. Therefore, it is more cost-effective for the company to replace the old equipment and take advantage of the trade-in allowance.

What Role Does a Trade-In Allowance on Old Equipment Play