Bert Company Is Considering Replacing a Machine That Is Presently

question 48

Multiple Choice

Bert Company is considering replacing a machine that is presently used in the production of its product.The following data are available: $$\begin{array} { l r r } & \text { Old Machine } & \begin{array} { r } \text { Replacement } \\\text { Machine }\end{array} \\\text { Original cost } & \$ 57,000 & \$ 35,000 \\\text { Useful life in years } & 17 & 5 \\\text { Current age in years } & 12 & 0 \\\text { Book value } & \$ 39,000 & - \\\text { Disposal value now } & \$ 8,000 & - \\\text { Disposal value in 5 years } & 0 & 0 \\\text { Annual cash operating costs } & \$ 7,000 & \$ 4,000\end{array}$$ The difference in cost between keeping the old machine and replacing the old machine, ignoring income taxes, is _____the old machine.

• A)$22,000 in favor of keeping
• B)$12,000 in favor of keeping
• C)$37,000 in favor of replacing
• D)$22,000 in favor of replacing

Understand the roles of various engine components such as the throttle valve, camshaft, and oil pump.

Describe engine displacement and how it is measured.

Comprehend the principles of forced induction systems like superchargers and turbochargers.

Explain the significance of the compression ratio in engine performance.

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Definitions:

Component Costs

The costs associated with each element or part of a product, project, or service, crucial for calculating the total cost or setting a price.

Investor Returns

The gain or loss on an investment over a specified period, usually expressed as a percentage of the investment's initial cost.

Capital Components

The various sources of funding a company uses to finance its operations, including debt, equity, and any hybrid instruments.

Cost of Capital

The essential return needed to justify the investment in a capital budgeting project, like constructing a new manufacturing facility.