August 2004
Intermediate to advanced
656 pages
15h 28m
English
Income taxes have some special effects on replacement decisions (Chapter 12). Specifically, keeping an already-owned asset incurs the opportunity cost (remember the discussion about the “outsider's viewpoint”), and it also defers possible depreciation recapture. The replacement alternatives (the challengers) might lead to tax credits in some cases. As well, the depreciation schedule needs to be determined so that tax effects of eventual scrapping or salvage can be identified. Replacement analysis needs to be done in after-tax terms or the wrong decision could be made.
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