Firm X Is Considering the Replacement of an Old Machine

question 11

Multiple Choice

Firm X is considering the replacement of an old machine with one that has a purchase price of $70,000.The current market value of the old machine is $25,000 but the book value is $32,000.What is the net cash outflow for the new machine with consideration for the sale of the old machine?

• A) $70,000
• B) $45,000
• C) $38,000
• D) $32,000

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Definitions:

Intended

Designed or planned to serve a particular purpose.

Technological Advancement

The process of innovation and improvement in technology, leading to the development of new products or the enhancement of existing ones.

Higher Value Use

The employment of resources or assets in a manner that maximizes their value or return, often resulting in the most efficient and profitable outcome.

Operating Loss

A situation where a business's operating expenses exceed its revenues, indicating that it is not making a profit from its core operations.