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If instead the challenger's minimum annual cost were 24 000, that defender should be

  • A.sold and the service discontinued
  • B.replaced only if its book value exceeds its market value
  • C.kept one more year
  • D.replaced immediately

Answer: C

The defender's 20 000 for another year is cheaper than the challenger's 24 000, so retention is right for now and the test is simply repeated next year. The decision is revisited annually rather than settled once and for all.

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