Question Two (40 Points) Avaya Company is thinking to replace a three year old loader with a new one that is more efficient. The following information was provided by the Company: $17,000 55,000 1 New loader List price Annual operating expenses Expected life in years Old loader Original cost Remaining book value Disposal value now Annual variable expenses Remaining life in years $120,000 35,000 8,000 78,000 1 Should the company replace or keep the old loader (Show your calculations) Question Four (10 Choose the correct answer for each of the following: (5 each) 1. Which of the following costs can be ignored when making a decision? A. Opportunity costs. B. Differential costs. C. Sunk costs. D. Relevant costs. 2. The term "opportunity cost" is best defined as: A. the amount of money paid for an item. B. the amount of money paid for an item, taking inflation into account. C. the amount of money paid for an item, taking possible discounts into account. D. the benefit associated with a rejected alternative when making a choice