Trail Power has been using the same machines to make its name brand clothing for the last 5 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 $450,000. The old machines presently have a book value of $145,000 and a market value of $37,000. They are expected to have a 5 year remaining life and zero salvage value. The new machines would cost the company $350,000 and have operating expenses of $19,000 a year. The new machines are expected to have a 5 year useful life and no salvage value. The operating expenses associated with the old machines are $55,000 a year. The new machines are expected to increase quality, justifying a price increase, and thereby increasing sales revenue by $35,000 a year. Select the true statement.

The company will be $37,000 better off over the 5 year period if it replaces the old equipment.

The company will be $53,000 better off over the 5 year period if it keeps the old equipment.

The company will be $90,000 better off over the 5 year period if it keeps the old equipment.

The company will be $42,000 better off over the 5 year period if it replaces the old equipment.

One way restriction message

You may not interact with questions in this series after you have submitted them.

Ok