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Which of the following is relevant to a keep-or-replace decision?

  • A.the market value of the existing asset
  • B.the original purchase price of the existing asset
  • C.the depreciation already charged on it
  • D.the interest already paid on the loan that bought it

Answer: A

Correct answer: the market value of the existing asset

Only the market value is relevant, because only it represents money that a decision now can affect: keeping the asset forgoes the proceeds a sale would bring. The purchase price, the depreciation charged and the interest already paid are all history, identical under either course.

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