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Comparing alternatives on cost alone is valid only if they

  • A.have the same first cost
  • B.have the same salvage value
  • C.are evaluated at different interest rates
  • D.provide the same service

Answer: D

The revenues must be identical for them to cancel, which is what service equivalence means. Where one alternative gives better output or longer availability, that difference has to be valued and brought into the comparison.

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