Exercise 1-2.

Sunk Cost [LO 2]

Rachel Cook owns Campus Copies, a copy business with several high-speed copy machines. One is a color copier that was purchased just last year at a cost of $25,000. Recently a salesperson got Rachel to witness a demo of a new $23,000 color copier that promises higher speed and more accurate color representation. Rachel is interested but she cant get herself to trade in a perfectly good copier for which she paid $25,000 and replace it with one that will cost $23,000.

Required:

Write a paragraph explaining why the cost of the old copier is irrelevant to Rachels decision.