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use to either Ge e. Gen-X would retain an existl rials on the new mach its $180,000 market value. Although the crall machine tool, it
use to either Ge e. Gen-X would retain an existl rials on the new mach its $180,000 market value. Although the crall machine tool, it would be used to position raw materials on tool. Personal Finance Problem 15 Sunk and opportunity cash flows Dave and Ann Stone have been living at their eir c er h rent home for the past 6 years. During that time, they have replaced the wat for $375, have replaced the dishwasher for $599, and have had to make miscella neous repair and maintenance expenditures of approximately $1,500. They have decided to move out and rent the house for $975 per month. Newspaper advertising will cost $75. Dave and Ann intend to paint the interior of the home and power- wash the exterior. They estimate that will run about $900. CHAPTER 11 Capital Budgeting Cash Flows and Risk Refinements471 The house should be ready to rent after that. In reviewing the financial situa- tion, Dave views all the expenditures as being relevant, so he plans to net out the estimated expenditures discussed above from the rental income. a. Do Dave and Ann understand the difference between sunk costs and opportunity costs? Explain the two concepts to them. b. Which of the expenditures should be classified as sunk cash flows, and which should be viewed as opportunity cash flows? P11-4 Book value Find the book value for each of the assets shown in the accompanying table, assuming that MACRS depreciation is being used. (See Table 4.2 for the appli
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