A company paid $200,000 eight years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $20,000 per year. The company is considering using this machine in a new project that will have incremental revenues of $35,000 per co
A company paid $200,000 eight years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $20,000 per year. The company is considering using this machine in a new project that will have incremental revenues of $35,000 per co
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:A company paid $200,000 eight years ago for a
specialized machine that has no salvage value and is
being depreciated at the rate of $20,000 per year. The
company is considering using this machine in a new
project that will have incremental revenues of $35,000 per
year and annual cash costs of $17,000. In analyzing the
new project, the $200,000 cost of the old machine is an
example of a(n):
A. sunk cost
B. out-of-pocket cost
C. opportunity cost
D. incremental cost
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