- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 5. Capital Investments and Capital Allocation
- Subject 1. Capital Investment
CFA Practice Question
A replacement project is a project where a firm invests in ______.
B. replacing a productive asset
C. developing a new product line
A. new assets
B. replacing a productive asset
C. developing a new product line
Correct Answer: B
Replacement projects deal with the investment in new assets that will replace old assets the firm already owns.
User Contributed Comments 3
| User | Comment |
|---|---|
| jallado0 | to replace a productive asset?? |
| vvenkatr | A firm produces widgets using machine A. Technology improves, and a new machine that can halve the production costs comes into the market. In this case, the firm could certainly consider replacing productive asset A by the new machine. "productive asset" = asset that produces |
| Sorcerer | A - Expansion project B - Repalcement project C - Expansion project @jallado0: Here,we have to take the best possible answer. In this case, it happens to be B. |