Nanny McPhee,the owner and manager of Nanny's Roasted Chicken Company,replaced the company's convection ovens just six months ago.Today,Green Valley Oven Manufacturing announced the availability of a new convection oven that cooks much more quickly with lower operating expenses.Nanny is considering the purchase of this faster,lower-operating cost,convection oven to replace the existing one they recently purchased.Selected information about the two ovens is given below:
Required:
a. What costs are sunk?
b. What costs are relevant?
c. What are the net cash flows over the next 10 years assuming that Nanny purchases the new convection oven?
d. What other factors should Nanny consider when making this decision?
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