Copy Center Is Considering Replacing Its Old Copying Machine, Which

Copy Center is considering replacing its old copying machine, which has a $3,200 book value, with a new one. Discounted cash flow analysis of the proposal to acquire the new machine shows an estimated net present value of $2,800. If the new machine is acquired, the old machine will have no resale value and will be given away. The loss on disposal of the old machine:

A) Is an opportunity cost of purchasing the new machine.
B) Exceeds the net present value of the new machine, indicating that the new machine should not be acquired.
C) Has already been deducted in arriving at the $2,800 net present value of the new machine.
D) Is a sunk cost and is not relevant to the decision at hand, except as it affects the timing of income tax payments.

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free