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Three of the following can justify replacing an asset. The exception is

  • A.the product it makes has changed specification
  • B.the asset has become fully depreciated
  • C.its operating costs have risen sharply
  • D.a more efficient machine is now available

Answer: B

Correct answer: the asset has become fully depreciated

Full depreciation is an accounting state, not an economic one: the asset may run perfectly well and cost less than anything that could replace it. The other three are genuine reasons - changed requirements, rising operating costs and the availability of something better are precisely what replacement analysis exists to evaluate.

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