1.1. Operating and Maintenance Costs Comparison

Try these first

1. 1.

   What is the annual operating cost for the challenger?

   Hint

   Look for the cost mentioned for the challenger.

2. 2.

   Define sunk costs in your own words.

   Hint

   Think about money spent that you can't get back.

3. 3.

   What is the annual operating cost of the defender?

   • ₹90,000
   • ₹1,35,000
   • ₹12,00,000

   Hint

   Look at the costs for each machine mentioned.

4. 4.

   True or False: Sunk costs should influence ongoing investment decisions.

   • True
   • False

   Hint

   Focus on why old costs aren't relevant.

5. 5.

   You are considering the defender and the challenger for a construction project. If you stick with the defender, the annual costs total ₹6,30,270. If you switch to the challenger, the annual costs are ₹6,18,890. How much would you save annually?

   Hint

   Calculate the difference between the defender's and challenger's annual costs.

6. 6.

   If the current market value of the defender drastically drops, making its salvage value negligible, how would this affect your decision? Discuss the implications.

   Hint

   Evaluate how market conditions and residual values play into overall costs and choices.