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Mountain Gear has been using the same machines to make its name-brand clothing for the last five years. A cost efficiency consultant has suggested that
Mountain Gear has been using the same machines to make its name-brand clothing for the last five years. A cost efficiency consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery. The old machines cost the company $400,000. The old machines presently have a book value of $140,000 and a market value of $32,000. They are expected to have a five-year remaining life and zero salvage value. The new machines would cost the company $300,000 and have operating expenses of $17,000 a year. The new machines are expected to have a five-year useful life and no salvage value. The operating expenses associated with the old machines are $50,000 a year. The new machines are expected to increase quality, justifying a price increase and thereby increasing sales revenue by $30,000 a year. Select the true statement Multiple Choice The company will be $47,000 better off over the 5 year period if it replaces the old equipment. The company will be $48,000 better off over the 5 year period if it replaces the old equipment O o The company will be $80,000 better off over the 5 year period if it keeps the old equipment. o The company will be $32,000 better off over the 5 year period if it replaces the old equipment
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