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Multi choise Hbeinn heppni ehf. is considering renewing its engine option. The table shows information that the company's CFO has compiled on the current machine
Multi choise Hbeinn heppni ehf. is considering renewing its engine option. The table shows information that the company's CFO has compiled on the current machine option and a possible new one.
Current machine cost | new machine cost | |
price | 100.000 | 50.000 |
accumulated depreciation | 40.000 | 0 |
book value | 60.000 | 0 |
annual operating expenses | 15.000 | 9.000 |
service life | 5 year | 5 year |
market value | 6.000 | 50.000 |
scrap value | 0 | 0 |
annual new income | 0 | 5.000 |
If the company invests in new machinery, the quality of production will increase and higher prices will be obtained for the company's products. This increase in income is estimated at ISK 5,000. per year as shown in the table. If investments are made in new machines, the current machine option will be sold at market value. Should Hbeinn be lucky to invest in new machinery or not?
a.Yes, invest, because over a 5-year period, the result will be ISK 12,000. better than continuing to use existing machinery and equipment b.Yes, invest, because over a 5-year period, the result will be ISK 11,000. better than continuing to use existing machinery and equipment c.No, do not invest, because over a 5-year period, the result will be ISK 6,000. worse than continuing to use existing machinery and equipment d.Yes, invest, because over a 5-year period, the result will be ISK 20,000. better than continuing to use existing machinery and equipment
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