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replacement cost

A Dictionary of Business and Management | 2006 | © A Dictionary of Business and Management 2006, originally published by Oxford University Press 2006. (Hide copyright information) Copyright

replacement cost The cost of replacing an asset, either in its present physical form or as the cost of obtaining equivalent services. If the latter is lower in amount than the former, the conclusion is that the assets currently used by the company are not those it would choose to acquire in the market place. Replacement cost may be used to value tangible fixed assets and in some circumstances such current assets as stock.

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