Practice Defining Sunk Cost (1.7) - Equipment Life and Replacement Analysis (Part 3)

Practice: Defining Sunk Cost

Lesson 1.7Equipment Life and Replacement Analysis (Part 3)

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8 questions

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6 sample questions

Question 1.
Define sunk cost.
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Think about money spent on a service or product that you can no longer use.
Question 2.
Why should sunk costs not influence current decisions?
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Consider how what was spent influences future expenses.
3Question 3.
What is a sunk cost?
- A cost that can be recovered later.
- A cost that has already been incurred and cannot be recovered.
- An expected future cost.
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Remember, it's about irrecoverable money.
4Question 4.
True or False: Sunk costs should influence your decision to replace old equipment.
- True
- False
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If you've already spent it, should it impact tomorrow's choices?
Question 5.
A company bought a software system for $150,000. After two years, its market value drops to $80,000. If they continue investing in updates costing $20,000 a year, at what point should they consider replacing it?
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Focus on performance and savings, not the original price.
Question 6.
Your friend spent $40,000 on a used car. Now, it's worth $15,000, and they're considering a new car worth $25,000. What advice would you give about the sunk cost?
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Consider how much usage they get from the current versus the future possibilities.

4 more questions in this section. Enroll free to practise them all.