A key difference between replacement and expansion project analyses is that with replacement,the incremental cash flows are measured as the net difference between projected cash flows from the current productive assets and cash flows of the proposed new productive assets.

Question

Quizplus · Accepted Answer

This statement is true. Replacement project analysis compares the cash flows from existing assets with the cash flows from replacing those assets with new ones, while expansion project analysis looks at the incremental cash flows from expanding the current productive assets.

A Key Difference Between Replacement and Expansion Project Analyses Is