When evaluating the expansion option, what value, if any, should the firm assign to this equipment as an initial cost of the project? a) $0 b) $44,500 c) $96,000 d) $124,500 e) $160,000
Webster & Moore paid $148,000, in cash, for equipment three years ago. At the beginning of last year, the company spent $21,000 to update the equipment with the latest technology. The company no longer uses this equipment in its current operations and has received an offer of $96,000 from a firm that would like to purchase it. The firm is debating whether to sell the equipment or to expand its operations so that the equipment can be used. The equipment, including the updates, has a book value of $44,500. When evaluating the expansion option, what value, if any, should the firm assign to this equipment as an initial cost of the project?
a) $0
b) $44,500
c) $96,000
d) $124,500
e) $160,000
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