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 irrelevant since it reduces the cost of the old equipment.
C) It is irrelevant 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 plays a relevant role in the decision to retain or replace equipment since it reduces the cost of the new equipment. Therefore, the decision maker must consider the trade-in value when weighing the costs and benefits of purchasing new equipment.

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