TEK, Inc, Is Considering Whether to Replace a Production Machine with with a Newer

question 41

Multiple Choice

TEK, Inc., is considering whether to replace a production machine with a newer model of the same machine. If TEK keeps the old machine, the trade-in value of the old equipment is an example of a(n)

• A)sunk cost.
• B)opportunity cost.
• C)avoidable cost.
• D)imputed cost.

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Definitions:

Coupon Bond

A type of bond that offers interest payments through coupons attached to the bond, redeemable by the holder at certain times.

Zero-coupon Bond

A debt security that doesn't pay interest but is traded at a deep discount, offering profits at maturity.

Bond Prices

The monetary amount at which a bond is traded, influenced by interest rates, credit ratings, and the bond's maturity.

Yield-to-maturity

The total return anticipated on a bond if the bond is held until it matures, accounting for interest payments and the difference between the purchase price and the par value.