Fatigue Corporation has a division operating at a $200,000 cash loss per year. The company cannot dispose

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Fatigue Corporation has a division operating at a $200,000 cash loss per year. The company cannot dispose of the division due to certain contractual arrangements it has made that require continued operation of the division. However, Fatigue has just received a proposal to invest in some new equipment with an estimated operating life of 10 years for the division at a cost of $150,000. If the equipment is purchased, the division will operate at a $40,000 cash loss per year. Should Fatigue Corp. consider acquisition of the equipment? Why or why not?

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Cost Accounting

ISBN: 9780256069198

3rd Edition

Authors: Edward B. Deakin, Michael Maher

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