Your Firm Is Considering Replacing an Existing Machine with a Newer

question 18

Multiple Choice

Your firm is considering replacing an existing machine with a newer model. Which of the following need not be considered when determining the incremental cash flows of the
Proposed project?

• A)labor costs associated with the existing machine
• B)selling price of the existing machine
• C)cost of the new machine
• D)All of the above costs need to be considered in determining the incremental cash flows of the new model.

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Definitions:

Total Asset Turnover Ratio

A financial metric that measures the efficiency of a company's use of its assets to generate sales revenue.

Net Profit Margin Ratio

A financial measurement that calculates how much of each dollar of revenues is translated into profits after accounting for all expenses, taxes, and interest, expressed as a percentage.

Return on Assets Ratio

A financial ratio indicating how Profitable a company is relative to its total assets, measuring how efficiently a company is using its assets to generate profit.

Net Profit Margin Ratio

A financial metric that shows the percentage of net income to sales revenue, indicating how much profit each dollar of sales generates.