Question
13. Management of Childers Corporation is considering whether to purchase a new model 370 machine costing $447,000 or a new model 240 machine costing $402,000
13.
Management of Childers Corporation is considering whether to purchase a new model 370 machine costing $447,000 or a new model 240 machine costing $402,000 to replace a machine that was purchased 7 years ago for $435,000. The old machine was used to make product M25A until it broke down last week. Unfortunately, the old machine cannot be repaired. |
Management has decided to buy the new model 240 machine. It has less capacity than the new model 370 machine, but its capacity is sufficient to continue making product M25A. |
Management also considered, but rejected, the alternative of simply dropping product M25A. If that were done, instead of investing $402,000 in the new machine, the money could be invested in a project that would return a total of $432,000.
-$447,000 -435,000 -$432,000 -402000 |
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