Sunk costs include:the original cost of the new system.the annual operating cost of the new system.the original cost of the existing system.the current salvage value of the existing system. Down East Chemicals is considering replacing its existing computer systemwith a new computer system. The new system can offer considerable savingsin computer processing and inventory management costs. Information aboutthe existing system and the new system follow:Original costAnnual operating costAccumulated depreciationCurrent salvage value of the existingsystemRemaining life in 5 yearsSalvage value in 5 yearsAnnual depreciationSunk costs include:Existing Computer New Computer$10,000$ 3,500$ 6,000$ 4,0005 years$0$ 2,000$15,000$ 2.000$ 3,000

A sunk cost is a cost that has already been incurred and cannot be recovered or changed. It is also…

Answered: Sunk costs include: the original cost…

Sunk costs include: the original cost of the new system. the annual operating cost of the new system. the original cost of the existing system. the current salvage value of the existing system.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

The following schedule reflects the incremental costs and revenues for acapital project. The company uses straight-line depreciation. The interestexpense reflects an allocation of interest on the amount of this investment,based on the company’s weighted average cost capital:Revenues $650,000Direct costs $270,000Variable overhead 50,000Fixed overhead 20,000Depreciation 70,000General & administrative 40,000Interest expense 8,000458,000Net profit before taxes $192,000══════The annual cash flow from this investment, before tax considerations, would be:
Several expenditures are listed below. Indicate whether or not each expenditure would be included in the cost of acquisition for each item below. The answer box provides two options, Yes (if the expenditure would be included ) or No, (if the expenditure would not be included.) Cost testing materials and labor in testing a purchased machine Yes before use Compensation for injury to No construction worker Cost of overhaul to a used Yes machine purchased before initial use Cost of tearing down a building Yes on newly acquired land Repairs to a new machine Yes damaged while moving it into > > > > >
Improvement of the production line resulting in an increase in productivity, $32,100 would be an expense in the period occured or would be capitalized and depreciated over the useful life of the asset?
The Dry Dock is considering a project with an initial cost of $105,271 and cash inflows for Years 1 to 3 of $37,200, $54,600, and $46,900, respectively. What is the IRR?
Requirments (a) Calculate the, the Payback Period, and the net Present Value of for each project.b) For each of the above methods of project appraisal recommend which project should be taken up. c) Using all the information gathered from the above techniques which project would you recommend giving the reasons for this decision. d) Explain the uses, limitations and merits of the Payback Period compared to Net Present Value in investment appraisal.