When Replacing an Old Asset with a New One,the Original

question 34

Multiple Choice

When replacing an old asset with a new one,the original purchase price of the old asset represents a(n) ________ cost.

• A) relevant
• B) differential
• C) opportunity
• D) sunk

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Definitions:

Target Cost

The maximum amount that can be spent on a product while still earning the required profit margin, based on market-driven pricing.

Desired Return

The target profit or return on investment that a company or investor aims to achieve.

Investment

Allocation of resources, typically money, in order to generate income or profit over time.

Selling Price

The amount of money a buyer pays to purchase a product or service from a seller.