The Peoria Cabinetworks can either spend $18,000 to buy a new laminating machine or use that money to build an extension on its loading dock. The salesperson selling the laminating machine must realize that buyers should look at all _____ before making any major investments.

Question

Quizplus · Accepted Answer

The salesperson should emphasize the concept of opportunity cost, which is the cost of forgoing the next best alternative. Peoria Cabinetworks must decide whether to invest in a new laminating machine or expand its loading dock, and the cost of either decision should be compared to the benefits that can be derived. By comparing the opportunity cost of each option, the company can make the most informed choice. Sunk costs, gross revenues, and net revenues, while important, are not as relevant when considering the decision between two mutually exclusive options. Net present values (B) would be relevant if the company was considering multiple investments with different payback periods, but that is not the case presented here.

The Peoria Cabinetworks Can Either Spend $18,000 to Buy a New