James Is Considering Replacing His Worn-Out Machines

question 32

Multiple Choice

James is considering replacing his worn-out machines. Which of the following is not a relevant cost for James when considering various available options?

• A) Costs of electricity consumed by current machines
• B) Changes in costs of labour needed to operate the new machines
• C) Costs of delivering the new machine
• D) Costs of replacing old machines

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Definitions:

Capital Structure

The mix of the three capital components (debt, preferred stock, and equity) used by a firm. The optimal capital structure is the structure at which stock price is maximized, all other things held equal. Also see Target capital structure.

Equity

The value of an ownership interest in property, including shareholders' equity in a company.

Tax Deductible

Expenses that can be subtracted from gross income, lowering the taxable income and thus the amount of tax owed.

Investor's Perspective

The viewpoint or considerations of an individual or entity actively investing or planning to invest in markets, focusing on potential risks and returns.