A company is considering replacing old equipment with new equipment. Which of the following is a relevant cost for incremental analysis?

A) Annual depreciation charge on the old equipment
B) Book value of the old equipment
C) Estimated annual depreciation of the new equipment
D) Cost of the new equipment

Relevant Cost

A relevant cost is a cost that will be affected by a decision in the future and is important in business decision-making processes.

Depreciation Charge

An accounting expense recorded to allocate the cost of a tangible asset over its useful life.

Book Value

The value of an asset according to its balance sheet account balance, often different from its market value.