Question

If you were analyzing a replacement project and you suddenly learned that the old equipment could be sold for $1,000 rather than $100, would this new information make the replacement look better or worse?

Answer 1

Answer:

This new information would make the replacement to look worse.

Explanation:

This is especially if the calculated net benefits from the replacement do not exceed $1,000.  In analyzing a replacement project, the choice to go ahead with the project depends on the perceived and calculated benefits or intrinsic values that the new project will convey.  If a new project does not yield higher returns than the old project, then one can say that "the old wine is better," thus, making it unnecessary to taste the new.