Covol Industries is developing the relevant cash flows associated with the proposed replacement of an existing machine tool with a new, technologically advanced one. Given the following costs related to the proposed project, explain whether each would be treated as asunk costor anopportunity costin developing the relevant cash flows associated with the proposed replacement decision. Justify your answer.

1. Covol would be able to use the same tooling, which had a book value of $40,000, on the new machine tool as it had used on the old one.
2. Covol would be able to use its existing computer system to develop programs for operating the new machine tool. The old machine tool did not require these programs. Although the firm's computer has excess capacity available, the capacity could be leased to another firm for an annual fee of $17,000.
3. Covol would have to obtain additional floor space to accommodate the larger new machine tool. The space that would be used is currently being leased to another company for $10,000 per year.
4. Covol would use a small storage facility to store the increased output of the new machine tool. The storage facility was built by Covol 3 years earlier at a cost of $120,000. Because of its unique configuration and location, it is currently of no use to either Covol or any other firm.