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What is the difference between the cash flow approach and the opportunity cost approach for replacement decisions? The opport

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The correct answer is option d) The opportunity cost approach treats the sale proceeds from selling the defender as a cost of keeping the defender whereas the cash flow approach treats those proceeds as revenue when acquiring the challenger.

The opportunity cost of keeping the defender is taken into account in the Opportunity cost approach and hence views the net proceeds of selling the defender.
Cash flow approach takes into account the cash flow consequences for replacement.

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