Relevant and Sunk Costs
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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:
EXISTING NEW
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?
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The expert examines relevant and sunk costs.
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a) Relevant costs are : Original cost of new mixer , Anual ...
Education
- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
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