What is calculated as an item's replacement cost divided by its expected lifespan in years?

• A. Annual Depreciation
• B. Underwriting Cost
• C. Market Value
• D. Capital Expenditure

Answer: (A)

The calculation described in the question is known as annual depreciation, which represents the amount by which an item's value decreases over a one-year period. This is especially relevant for assets such as property, machinery, or equipment.

Annual depreciation provides a method for businesses and individuals to allocate the cost of an asset over its useful life. By dividing the replacement cost of an item by its expected lifespan in years, you can arrive at the annual depreciation expense. This concept is pivotal in accounting and finance, as it helps in assessing the asset's value over time and can affect both financial reporting and tax calculations.

The other options do not align with the definition or calculation presented in the question. Underwriting cost pertains to the expenses incurred in evaluating and assuming risk for insurance, market value refers to the current value of an asset based on what buyers are willing to pay, and capital expenditure involves spending on physical assets that will last a long time, which does not involve the year-to-year allocation as depreciation does.