Question

Priscilla owns a factory that produces kayaks. She is trying to decide whether to continue using her one of her current pieces of equipment or replacing it with more updated equipment. Which of the following does Priscilla not need to consider?
a. cost of the new equipment. b. the book value of the old equipment. c. annual operating cost of the new equipment d. book value of the old equipment

Answer 1

D. Cost of old equipment will be irrelevant for Priscilla for buying new machine.

When evaluating the costs of repairing or replacing, always keep the long term in mind. When purchasing a new piece of equipment, take into account the price of the item, its lifespan, potential salvage value, operational costs, and any potential revenue growth.

Take into account an item's remaining useful life, maintenance expenses, market worth, and potential salvage rate. Equipment doesn't age gracefully. Your equipment will require more extensive maintenance the older it is.

Higher maintenance expenditures are frequently the result of this. The equipment will provide you a decreasing return on your repair investment as you carry on making repairs.

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