When Making the Decision to Replace an Old Factory Machine

question 164

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.

---

Definitions:

Transferor

An individual or entity that transfers rights, ownership, or interests in assets to another party.

HDC (Holder in Due Course)

A legal term referring to someone who has acquired a negotiable instrument in good faith for value and without notice of any defect.

Defective Instrument

A legal or financial document that contains errors, omissions, or flaws rendering it invalid or ineffective.

Dishonor

To refuse to accept or pay a draft or a promissory note when it is properly presented. An instrument is dishonored when presentment is properly made and acceptance or payment is refused or cannot be obtained within the prescribed time.