The Cost of Using an Existing Asset: Small Appliances, Inc

question 26

Multiple Choice

The cost of using an existing asset: Small Appliances, Inc., is considering starting a new line of business with the excess capacity it currently has on its rivet machine. The current machine is expected to last four years at the current rate of production. However, if a new line of business is taken on, then the machine will have to be replaced in three years instead of four. A new machine that will last four years would cost $50,000. What is the cost of taking on the new line of business? Round to the nearest dollar and assume a 9 percent cost of capital.

• A) $11,917
• B) $12,500
• C) $15,433
• D) $50,000

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Definitions:

Parietal Bones

A pair of bones forming the sides and roof of the skull's upper part, contributing to the cranial structure.

Alveolar Process

The part of the jawbone that holds the teeth, providing support and promoting the health and stability of the teeth.

Atlas

The first cervical vertebra of the spine, supporting the globe of the head.

Sacrum

A large, triangular bone at the base of the spine that forms by the fusion of vertebrae, uniting with the pelvis.