Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 2E
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![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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F39386f62-dd9d-4424-b395-0e2661a16f1a%2F9f591a10-dee6-4b6d-b6e9-852e12f38653%2Fpm22sip_processed.jpeg&w=3840&q=75)
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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