uipment), wh ioeplace an old piece of equipment with a newer, state of the art G

Question

uipment), wh ioeplace an old piece of equipment with a newer, state of the art G) Original cost of old equipment today II) Salvage value of old state of the art model (ney of the following Tollowing costs would be considered irrelevant? (iii) Salvage ginal cost of new equipment age value of new equipment at the end ofits useful life (iv) Orignze value of old equipment at the end of its useful ife a) (i) only b) (i) and (ii) only. c) (i) and (iii) only. d) (), (ii), and (iii) only. e) (), (ii), (ii), and (v) only

Explanation / Answer

Answer is a. (i) and (iii) only.

Explanation:

The Orignal cost of old machinery is a sunk cost already incurred, hence irrelevant. However, the when new machinery will be purchased, the old machinery will be sold immediately, hence the present salvage value shall be considered not the salvage value at the end of project.

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