In this case, we have to deduct the original equipment cost with the accumulated depreciation to date.
$600,000 - $420,00 = $180,000
Purchasing a new machine would cost $790,000, which can be deducted with the remaining value of the old machine plus its value once sold. To do this, we have:
$790,000 - $180,000 - $8,000 = $602,000
The sunk cost in this case is $602,000.
