Karen's Cookie Company is considering replacing its giant cookie mixer with a new one. The following data has been compiled to evaluate the function:
Original Cost $8,000 $10,000
Annual Operating Cost $4,000 $2,200
Remaining Life 5 years 5 years
Disposal value now $3,000
a. What costs are relevant?
b. What costs are sunk?
c. What are the net cash flows, assuming Karen's Cookie Company purchases the new cookie mixer?
a) Relevant costs are : Original cost of new mixer , Anual ...
The expert examines relevant and sunk costs.