Question 7

A company is deciding between purchasing two machines. Machine A costs $523,000 and Machine B costs $482,000 The purchase is to replace a machine that was purchased 7 years ago for $518,000. The old machine was used to make product XYZ until it broke down last week. Unfortunately, the old machine cannot be repaired. Management has decided to buy Machine B. It has less capacity than Machine A but enough to continue making product XYZ Management also considered, but rejected, the alternative of simply dropping product XYZ. If that were done, instead of Investing $482,000 in the new machine, the money could be invested in a project that would return a total of 5497000 in making the decision to invest in Machine B, the opportunity cost is: Multiple Choice $523 000 Multiple Choice $523.000 $497.000 $482.000 $518,000