Mountain Gear has been using the same machines to make its name-brand clothing for the last five 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 $390,000. The old machines presently have a book value of $139,000 and a market value of $31,000. They are expected to have five year remaining life and zero salvage value. The new machines would cost the company $290,000 and have operating expenses of $19,000 a year. The new machines are expected to have a five-year useful life and no salvage value. The operating expenses associated with the old machines are $49,000 a year. The new machines are expected to increase quality, justifying a price increase and thereby increasing sales revenue by $29,000 a year. Select the true statement Multiple Choice The company will be $31,000 better off over the 5 year period if it replaces the old equipment The company will be $36,000 better off over the 5 year period if it replaces the old equipment The compony will be $78,000 better off over the 5 year period if it keeps the old equipment. The company will be $47,000 better off over the 5 year period if it replaces the old equipment.
Mountain Gear has been using the same machines to make its name-brand clothing for the last five 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 $390,000. The old machines presently have a book value of $139,000 and a market value of $31,000. They are expected to have five year remaining life and zero salvage value. The new machines would cost the company $290,000 and have operating expenses of $19,000 a year. The new machines are expected to have a five-year useful life and no salvage value. The operating expenses associated with the old machines are $49,000 a year. The new machines are expected to increase quality, justifying a price increase and thereby increasing sales revenue by $29,000 a year. Select the true statement Multiple Choice The company will be $31,000 better off over the 5 year period if it replaces the old equipment The company will be $36,000 better off over the 5 year period if it replaces the old equipment The compony will be $78,000 better off over the 5 year period if it keeps the old equipment. The company will be $47,000 better off over the 5 year period if it replaces the old equipment.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Mountain Gear has been using the same machines to make its name-brand clothing for the last five 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 5390,000. The old machines presently have a book value of $139,000 and a market value of $31,000. They are expected to have
five year remaining life and zero salvage value. The new machines would cost the company $290,000 and have operating expenses of
$19,000 a year. The new machines are expected to have a five-year useful life and no salvage value. The operating expenses associated
with the old machines are $49,000 a year. The new machines are expected to increase quality, justifying a price increase and thereby
increasing sales revenue by $29,000 a year. Select the true statement.
Multiple Choice
The company will be $31,000 better off over the 5 year period if it replaces the old equipment
The company will be $36,000 better off over the 5 year period if it replaces the old equipment
The compony will be $78,000 better off over the 5 year period if it keeps the old equipment.
The company will be $47,000 better off over the 5 year period if it replaces the old equipment.
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