Savannah Motors
Savannah Motors Is Trying to Decide Whether It $\text {\underline{ Old machine} }$

Multiple Choice

Savannah Motors
Savannah Motors is trying to decide whether it should keep its existing car washing machine or purchase a new one that has technological advantages (which translate into cost savings) over the existing machine.Information on each machine follows:
                                                                        $\text {\underline{ Old machine} }$    $\text {\underline{ New machine} }$
$\begin{array}{lll}\text { Original cost } & \$ 9,000 && \$ 20,000 \\\text { Accumulated depreciation } & 5,000 && 0 \\\text { Annual cash operating costs } & 9,000& & 4,000 \\\text { Current salvage value of old machine } & 2,000 & \\\text { Salvage value in } 10 \text { years } & 500 && 1,000 \\\text { Remaininglife } & 10 \text { yrs } &&10 yrs\end{array}$





Refer to Savannah Motors.The estimated $500 salvage value of the existing machine in 10 years represents a(n)

A) sunk cost.
B) opportunity cost of selling the existing machine now.
C) opportunity cost of keeping the existing machine for 10 years.
D) opportunity cost of keeping the existing machine and buying the new machine.