Smith Industries Is Considering Replacing a Machine That Is Presently

question 55

Multiple Choice

Smith Industries is considering replacing a machine that is presently used in its production process.The following information is available: $$\begin{array} { | l | l | l | } \hline & \text { Old Machine } & \text { Replacement Machine } \\\hline \text { Oripinal cost } & \$ 45,000 & \$ 35,000 \\\hline \text { Remaining useful life in years } & 5 & 5 \\\hline \text { Curent age in years } & 5 & 0 \\\hline \text { Bogk value } & \$ 25,000 & \\\hline \text { Current disposal value in cash } & \$ 8,000 & \\\hline \text { Future disposal value in cash (in 5 years) } & \$ 0 & \$ 00 \\\hline \text { Arnual cash operating costs } & \$ 7,000 & \$ 4,000 \\\hline\end{array}$$ Which of the information provided in the table is irrelevant to the replacement decision?

• A)The annual operating cost of the old machine
• B)The original cost of the old machine
• C)The current disposal value of the old machine
• D)Both A and C

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Working Capital

Working capital is the difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of a company.

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