You are evaluating whether to retire your current computer modem and replace it with a new modem that incorporates new features. Which of the following would not be relevant to your decision-making process?[Fill in the blank]

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BlackTom AI · Accepted Answer

When evaluating retirement of the current modem and replacement with a new one that has additional features, it is essential to distinguish between sunk costs, future incremental costs, and opportunities.
Option a: Installation and transportation costs of $500 to set up the new modem. This is a future, incremental cost tied to the decision to acquire the new modem, so it is relevant.
Option b: $50,000 spent on research and development costs for the older modem. This is a past expenditure already incurred and not recoverable, a classic sunk cost. Since it cannot be changed by the present decision and should not affect future choices, it is not relevant to whether you retire the old modem.
Option c: Equipment you own with a market value of $30,000 that can be used to build the new modems. This represents an opportunity to reuse assets, a relevant consideration because it affects the net cost of the replacement and the資資You might avoid buying new equipment if you can repurpose existing assets, so it matters for the decision.
Option d: $25,000 in salvage value you will receive for scrapping the old modem’s obsolete production equipment. This is an incremental cash inflow associated with removing the old asset and is relevant to the overall cost-benefit analysis of replacement.
In summary, the key distinction is: sunk costs like past R&D (option b) do not influence future decision-making, while installation costs, usable assets, and salvage values do.

You are evaluating whether to retire your current computer modem and replace it with a new modem that incorporates new features. Which of the following would not be relevant to your decision-making process?[Fill in the blank]

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