ABC CO. is considering replacing a production line with a new, more productive one. You are given the information that follows.

• The existing production line currently generates $100,000 profit per year and could be sold today for $40,000.
• The new proposed production line would generate profits of $150,000 per year
• The new proposed production line requires an initial investment $80,000.
• The company is seeking your advice regarding whether to replace the production line or keep the existing one.

Required:

1. Based on the Marginal analysis concept, what would you recommend?
2. State the reasons why focusing on profit only should not be the optimal goal for companies.