2. Information About the Defender

Try these first

1. 1.

   What is the annual operating cost of the defender?

   Hint

   Refer to the section discussing the costs associated with the defender.

2. 2.

   What does sunk cost mean?

   Hint

   Think about costs that you've spent money on that don't affect future decisions.

3. 3.

   What is the annual operating cost for the defender?

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

   Hint

   Refer to the costs section discussing the defender's financial figures.

4. 4.

   Is the current trading value of the equipment relevant to replacement analysis? (True/False)

   • True
   • False

   Hint

   Think about what decides the future financial implications of holding equipment.

5. 5.

   Calculate the equivalent annual cost of the defender given the following parameters: initial cost = ₹22,50,000, annual operating costs = ₹1,35,000, salvage value after 5 years = ₹6,00,000, interest rate = 10%.

   Hint

   Use the uniform series capital recovery factor and the sinking fund factor for calculations.

6. 6.

   Discuss how sunk costs could impact decision-making in a way that could lead to losses.

   Hint

   Reflect on emotional vs. rational decision-making in business.