When Making the Decision to Replace an Old Factory Machine

question 139

Essay

When making the decision to replace an old factory machine with a new one, financial and non-financial factors are considered. As with any investment, a company investing in factory machinery expects that the new machinery will generate a future return.

Required:

a. Define the two types of returns that can be expected from investments in a long-term asset such as factory machinery.

b. List three financial factors that a company might consider before making an investment in factory machinery.

c. List three non-financial factors that a company might consider before making an investment in factory machinery.

d. List one cost that is not included in a decision to replace an old factory machine with a new one.

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Definitions:

Extension of Time

An allowance by the IRS giving taxpayers extra time to file their tax returns beyond the original due date.

Married Filing Separately

A tax filing status that allows a married individual to file their taxes separately from their spouse.

Legally Married

The status of individuals who are united in a legal marriage recognized by their jurisdiction, affecting tax filing status.

D4 Follower

A term used in situational leadership to describe individuals who are highly competent and highly committed, requiring a delegating leadership style.