When a business is considering whether to replace old equipment with newer equipment, the original cost of the old equipment-compared to the cost of the new equipment-is information relevant to the business decision.

Question

Quizplus · Accepted Answer

The original cost of the old equipment is a sunk cost and is not relevant to the decision-making process. What matters are the future costs and benefits associated with the new equipment compared to the continuing use of the old equipment.

When a Business Is Considering Whether to Replace Old Equipment