Tabitha Company Is Considering Replacing a Machine That Is Presently

question 6

Multiple Choice

Tabitha Company is considering replacing a machine that is presently used in the production of its product. The following data are available: $\begin{array}{lll}&& \text { Replacement } \\&\text { Old Machine } & \text { Machine }\\\text { Origin al cost } & \$ 60,000 & \$ 35,000 \\\text { Useful lif in years } & 10 & 5 \\\text { Current age in years } & 5 & 0 \\\text { Book value } & \$ 25,000 & - \\\text { Disposal value now } & \$ \$, 000 & - \\\text { Disposal value in 5 years } & 0 & 0 \\\text { Annual cash operating costs } & \$ 10,000 & \$ 4,000\end{array}$ The total relevant costs to consider if the old machine is kept are:

• A) $50,000
• B) $30,000
• C) $52,000
• D) $60,000

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Definitions:

Partnership Agreement

A formal arrangement between two or more parties to manage and operate a business and share its profits or losses in accordance with the terms set out in the agreement.

Bylaws

Internal rules adopted by an organization or corporation to govern its actions and decisions.

Financial Manager

A professional responsible for managing an organization's financial health by planning, directing, and controlling financial activities.

Secondary Market

The secondary market is where previously issued financial instruments such as stocks and bonds are bought and sold, as opposed to their initial issuance in the primary market.