Major Nelson Company Is Considering Replacing a Machine That Is

question 11

Multiple Choice

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

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

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Definitions:

Jean Calvin

A French theologian and key figure in the Protestant Reformation, known for his influential teachings and writings, particularly those that laid the groundwork for Calvinism.

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Indian Society

A broad term that encapsulates the diverse socio-cultural structure, traditions, and practices of the people living in India.

Hereditary Right

A privilege or status passed down through generations within a family, often pertaining to titles, positions of authority, or ownership of property.