Vedat Corporation acquires new equipment with a list price of $100 to expand its product line, paying $50 on delivery and agreeing to pay $25 in one years time and the remaining $25 in two years time. The company extends a portion of its factory wall in order to fit the new machine in place and then rearranges existing equipment into a more efficient layout. The new equipment is dropped on installation requiring repairs prior to use. At the end of the equipments useful life, Vedat Corporation is required to dismantle and dispose of it, paying a special environmental tax due to hazardous materials in its construction. Vedat is licensed to manufacture products with this equipment, and is required to pay a royalty for each unit produced.

Instructions

Discuss how the cost of the new equipment should be determined.