Answer (C) is correct . All relevant costs should be considered when evaluating an equipment replacement decision. These include the initial investment in the new equipment, any required investment in working capital, the disposal price of the new equipment, the disposal price of the old equipment, the operating costs of the old equipment, and the operating costs of the new equipment. The original cost or fair value of the old equipment is a sunk cost and is irrelevant to future decisions.
Answer (A) is incorrect because The current disposal price of the old equipment should be considered when evaluating an equipment replacement decision.
Answer (B) is incorrect because The operating costs of the old equipment should be considered when evaluating an equipment replacement decision.
Answer (D) is incorrect because The operating costs of the new equipment should be considered when evaluating an equipment replacement decision.
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