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1. You are a fleet manager for a metro-area company. You've recently discovered that ten of your company's vehicles require repairs which will cost...

This question was created from Assignment 4-FA17 AP2.docx


Select one: a. The existence of past repairs is a sunk cost that does not affect the current cost-benefit decision, and so the cost of past repairs is irrelevant to your present decision whether to repair or replace. b. Past repairs increase the current value of the vehicle, and so the cost of those past repairs should be considered a benefit that may partially or completely offset the cost of the repairs that are now required. c. Whenever the value of the repair exceeds the replacement cost, it is preferable to disinvest from the asset entirely. The appropriate choice is to neither repair nor replace, but to sell the vehicles as-is. d. Past repairs represent an investment in an asset; your roommate is correct that recouping the value of the investment necessitates keeping the vehicles and repairing them, rather than replacing them.


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