7. Conclusion of Lecture 8

Try these first

1. 1.

   What is the operating cost of the challenger?

   Hint

   Refer to the cost comparison section.

2. 2.

   Define sunk cost.

   Hint

   Think of costs that have already been incurred.

3. 3.

   What is the operating cost of the defender?

   • ₹90,000
   • ₹1,35,000
   • ₹6,00,000

   Hint

   Review the cost section to find the defender’s operating costs.

4. 4.

   True or False: Sunk costs must be considered in replacement analysis.

   • True
   • False

   Hint

   Consider if past costs affect future strategies.

5. 5.

   If the defender has an annual operating cost of ₹1,35,000 and a salvage value of ₹6,00,000 after 5 years, calculate the EAC assuming an interest rate of 10%. Is keeping it financially viable over the next 5 years?

   Hint

   Apply interest factors and calculate numerical values.

6. 6.

   Debate whether sunk costs should play any role in equipment replacement suggestions. Create arguments for why they should or shouldn't.

   Hint

   Think about how each affects future decisions.