Question
Wildhorse Company is considering the purchase of a new machine. Its invoice price is $ 144,000 ,freight charges are estimated to be $ 3,500 ,
Wildhorse Company is considering the purchase of a new machine. Its invoice price is $ 144,000 ,freight charges are estimated to be $ 3,500 , and installation costs are expected to be $ 5,900 .Salvage value of the new machine is expected to be zero after a useful life of 4 years. Existingequipment could be retained and used for an additional 4 years if the new machine is notpurchased. At that time, the salvage value of the equipment would be zero. If the new machine ispurchased now, the existing machine would be scrapped. Wildhorse s accountant, Laura Hall , hasaccumulated the following data regarding annual sales and expenses with and without the newmachine. 1. Without the new machine, Wildhorse can sell 9,000 units of product annually at a perunit selling price of $ 130 . If the new unit is purchased, the number of units producedand sold would increase by 25 %, and the selling price would remain the same.
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