Assume Your Firm Has an Unused Machine That Originally Cost

question 69

Multiple Choice

Assume your firm has an unused machine that originally cost $75,000,has a book value of $20,000,and is currently worth $25,000.Ignoring taxes,the correct opportunity cost for this machine in capital budgeting decisions is:

• A) $75,000
• B) $25,000
• C) $20,000
• D) $5,000

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Definitions:

Competition

The rivalry among businesses to capture sales, market share, and customer loyalty in a particular market or industry.

Theoretically

Pertaining to or based on a theory; an explanation or system of ideas intended to explain something, especially one based on general principles independent of the thing to be explained.

Product Life Cycle

The process through which a product goes from when it is first introduced into the market through its decline or discontinuation.

Sales and Profits

Relates to the revenue generated from goods or services sold by a business and the financial gain remaining after all expenses have been deducted.