Calculate the sunk cost.

Question

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Answer 1

Question

Chapter 14, Problem 1P

(a):

To determine

Calculate the sunk cost.

(a):

Expert Solution

Explanation of Solution

Time period is denoted by n and the interest rate is denoted by i. Sunk cost can be calculated as follows.

Sunk cost=Initial cost−Current value=12,000−2,000=10,000

Sunk cost is $9,000.

(b):

To determine

Calculate the opportunity cost.

(b):

Expert Solution

Explanation of Solution

Opportunity cost is equal to the market value of that particular year. Thus, opportunity cost is $2,000. Present worth (PW) can be calculated as follows.

PW=(Opportunity cost+Maintenance cost((1+i)1−1i(1+i)1))=(2,000+10,000((1+0.15)3−10.15(1+0.15)3))=24,832

Present worth is $24,832.

(c):

To determine

Calculate the present worth.

(c):

Expert Solution

Explanation of Solution

Time period is denoted by n and the interest rate is denoted by i. Present worth (PW) can be calculated as follows.

PW=(PriceMachine+Operating cost((1+i)1−1i(1+i)1)+Salvage vlaue(1(1+i)2))=(15,000+3,000((1+0.15)3−10.15(1+0.15)3)+5,000(1(1+0.15)3))=18,562

Present worth is $18,562.

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Answer 2

Question

Chapter 14, Problem 1P

(a):

To determine

Calculate the sunk cost.

(a):

Expert Solution

Explanation of Solution

Time period is denoted by n and the interest rate is denoted by i. Sunk cost can be calculated as follows.

Sunk cost=Initial cost−Current value=12,000−2,000=10,000

Sunk cost is $9,000.

(b):

To determine

Calculate the opportunity cost.

(b):

Expert Solution

Explanation of Solution

Opportunity cost is equal to the market value of that particular year. Thus, opportunity cost is $2,000. Present worth (PW) can be calculated as follows.

PW=(Opportunity cost+Maintenance cost((1+i)1−1i(1+i)1))=(2,000+10,000((1+0.15)3−10.15(1+0.15)3))=24,832

Present worth is $24,832.

(c):

To determine

Calculate the present worth.

(c):

Expert Solution

Explanation of Solution

Time period is denoted by n and the interest rate is denoted by i. Present worth (PW) can be calculated as follows.

PW=(PriceMachine+Operating cost((1+i)1−1i(1+i)1)+Salvage vlaue(1(1+i)2))=(15,000+3,000((1+0.15)3−10.15(1+0.15)3)+5,000(1(1+0.15)3))=18,562

Present worth is $18,562.

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Answer 3

Question

Chapter 14, Problem 1P

(a):

To determine

Calculate the sunk cost.

(a):

Expert Solution

Explanation of Solution

Time period is denoted by n and the interest rate is denoted by i. Sunk cost can be calculated as follows.

Sunk cost=Initial cost−Current value=12,000−2,000=10,000

Sunk cost is $9,000.

(b):

To determine

Calculate the opportunity cost.

(b):

Expert Solution

Explanation of Solution

Opportunity cost is equal to the market value of that particular year. Thus, opportunity cost is $2,000. Present worth (PW) can be calculated as follows.

PW=(Opportunity cost+Maintenance cost((1+i)1−1i(1+i)1))=(2,000+10,000((1+0.15)3−10.15(1+0.15)3))=24,832

Present worth is $24,832.

(c):

To determine

Calculate the present worth.

(c):

Expert Solution

Explanation of Solution

Time period is denoted by n and the interest rate is denoted by i. Present worth (PW) can be calculated as follows.

PW=(PriceMachine+Operating cost((1+i)1−1i(1+i)1)+Salvage vlaue(1(1+i)2))=(15,000+3,000((1+0.15)3−10.15(1+0.15)3)+5,000(1(1+0.15)3))=18,562

Present worth is $18,562.

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Answer 4

Question

Chapter 14, Problem 1P

(a):

To determine

Calculate the sunk cost.

(a):

Expert Solution

Explanation of Solution

Time period is denoted by n and the interest rate is denoted by i. Sunk cost can be calculated as follows.

Sunk cost=Initial cost−Current value=12,000−2,000=10,000

Sunk cost is $9,000.

(b):

To determine

Calculate the opportunity cost.

(b):

Expert Solution

Explanation of Solution

Opportunity cost is equal to the market value of that particular year. Thus, opportunity cost is $2,000. Present worth (PW) can be calculated as follows.

PW=(Opportunity cost+Maintenance cost((1+i)1−1i(1+i)1))=(2,000+10,000((1+0.15)3−10.15(1+0.15)3))=24,832

Present worth is $24,832.

(c):

To determine

Calculate the present worth.

(c):

Expert Solution

Explanation of Solution

Time period is denoted by n and the interest rate is denoted by i. Present worth (PW) can be calculated as follows.

PW=(PriceMachine+Operating cost((1+i)1−1i(1+i)1)+Salvage vlaue(1(1+i)2))=(15,000+3,000((1+0.15)3−10.15(1+0.15)3)+5,000(1(1+0.15)3))=18,562

Present worth is $18,562.

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Answer 5

Chapter 14, Problem 1P

(a):

To determine

Calculate the sunk cost.

(a):

Expert Solution

Explanation of Solution

Time period is denoted by n and the interest rate is denoted by i. Sunk cost can be calculated as follows.

Sunk cost=Initial cost−Current value=12,000−2,000=10,000

Sunk cost is $9,000.

(b):

To determine

Calculate the opportunity cost.

(b):

Expert Solution

Explanation of Solution

Opportunity cost is equal to the market value of that particular year. Thus, opportunity cost is $2,000. Present worth (PW) can be calculated as follows.

PW=(Opportunity cost+Maintenance cost((1+i)1−1i(1+i)1))=(2,000+10,000((1+0.15)3−10.15(1+0.15)3))=24,832

Present worth is $24,832.

(c):

To determine

Calculate the present worth.

(c):

Expert Solution

Explanation of Solution

Time period is denoted by n and the interest rate is denoted by i. Present worth (PW) can be calculated as follows.

PW=(PriceMachine+Operating cost((1+i)1−1i(1+i)1)+Salvage vlaue(1(1+i)2))=(15,000+3,000((1+0.15)3−10.15(1+0.15)3)+5,000(1(1+0.15)3))=18,562

Present worth is $18,562.

Answer 6

Chapter 14, Problem 1P

(a):

To determine

Calculate the sunk cost.

(a):

Expert Solution

Explanation of Solution

Time period is denoted by n and the interest rate is denoted by i. Sunk cost can be calculated as follows.

Sunk cost=Initial cost−Current value=12,000−2,000=10,000

Sunk cost is $9,000.

Answer 7

Chapter 14, Problem 1P

(a):

To determine

Calculate the sunk cost.

Answer 8

(a):

Expert Solution

Explanation of Solution

Time period is denoted by n and the interest rate is denoted by i. Sunk cost can be calculated as follows.

Sunk cost=Initial cost−Current value=12,000−2,000=10,000

Sunk cost is $9,000.

Answer 9

(a):

Expert Solution

Answer 10

(a):

Expert Solution

Answer 11

Expert Solution

Answer 12

(b):

To determine

Calculate the opportunity cost.

(b):

Expert Solution

Explanation of Solution

Opportunity cost is equal to the market value of that particular year. Thus, opportunity cost is $2,000. Present worth (PW) can be calculated as follows.

PW=(Opportunity cost+Maintenance cost((1+i)1−1i(1+i)1))=(2,000+10,000((1+0.15)3−10.15(1+0.15)3))=24,832

Present worth is $24,832.

Answer 13

(b):

To determine

Calculate the opportunity cost.

Answer 14

(b):

Expert Solution

Explanation of Solution

Opportunity cost is equal to the market value of that particular year. Thus, opportunity cost is $2,000. Present worth (PW) can be calculated as follows.

PW=(Opportunity cost+Maintenance cost((1+i)1−1i(1+i)1))=(2,000+10,000((1+0.15)3−10.15(1+0.15)3))=24,832

Present worth is $24,832.

Answer 15

(b):

Expert Solution

Answer 16

(b):

Expert Solution

Answer 17

Expert Solution

Answer 18

(c):

To determine

Calculate the present worth.

(c):

Expert Solution

Explanation of Solution

Time period is denoted by n and the interest rate is denoted by i. Present worth (PW) can be calculated as follows.

PW=(PriceMachine+Operating cost((1+i)1−1i(1+i)1)+Salvage vlaue(1(1+i)2))=(15,000+3,000((1+0.15)3−10.15(1+0.15)3)+5,000(1(1+0.15)3))=18,562

Present worth is $18,562.

Answer 19

(c):

To determine

Calculate the present worth.

Answer 20

(c):

Expert Solution

Explanation of Solution

Time period is denoted by n and the interest rate is denoted by i. Present worth (PW) can be calculated as follows.

PW=(PriceMachine+Operating cost((1+i)1−1i(1+i)1)+Salvage vlaue(1(1+i)2))=(15,000+3,000((1+0.15)3−10.15(1+0.15)3)+5,000(1(1+0.15)3))=18,562

Present worth is $18,562.

Answer 21

(c):

Expert Solution

Answer 22

(c):

Expert Solution

Answer 23

Expert Solution

Answer 24

Ch. 14 - Prob. 1P Ch. 14 - Prob. 2P Ch. 14 - Prob. 3P Ch. 14 - Prob. 4P Ch. 14 - Prob. 5P Ch. 14 - Prob. 6P Ch. 14 - Prob. 7P Ch. 14 - Prob. 8P Ch. 14 - Prob. 9P Ch. 14 - Prob. 10P

Calculate the sunk cost.

Calculate the sunk cost.

Explanation of Solution

Calculate the opportunity cost.

Explanation of Solution

Calculate the present worth.

Explanation of Solution

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Chapter 14 Solutions