What are the two conditions behind the One Year Principle?
A)Capital costs for a defender are small compared to the operating costs, and the annual operating costs are gradually increasing.
B)Capital costs for a defender are higher than the operating costs, and the annual operating costs are gradually increasing.
C)Capital costs for a defender are less than the operating costs, and the increase in annual operating costs is not monotonic.
D)Capital costs for a defender are higher than the operating costs, and the increase in annual operating costs is not monotonic.
E)Capital costs for a defender are less than the operating costs, and the annual operating costs are monotonically declining.

Question

Quizplus · Accepted Answer

The One Year Principle applies when capital costs are small compared to operating costs, and the operating costs are gradually increasing, making it economical to replace the asset.

What Are the Two Conditions Behind the One Year Principle