Why Is the Original Purchase Price of an Old Machine

question 32

Multiple Choice

Why is the original purchase price of an old machine that is being replaced never included in capital budgeting decisions?

• A)It is an opportunity cost, and thus not relevant.
• B)No future cash flows are associated with its purchase.
• C)It will affect future costs.
• D)It is a cost expensed when the new machine is acquired.

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Definitions:

Extinction

The reduction and eventual disappearance of a learned response, typically when the stimulus originally eliciting the response no longer occurs.

Reinforcement

In behavioral psychology, a consequence applied that strengthens an organism's future behavior whenever that behavior is preceded by a specific antecedent stimulus.

Latent Learning

Learning that occurs without any obvious reinforcement of the behavior or associations that are learned, becoming apparent only when there is an incentive to demonstrate it.

Variable-Ratio

A schedule of reinforcement where a response is rewarded after an unpredictable number of responses, often used in gambling and behavior training.