7. (5 pts) A company bought production equipment 2 years ago for $45,000. The eq

Question

7. (5 pts) A company bought production equipment 2 years ago for $45,000. The equipment was expected to last for years and the salvage value was estimated to be $6,000 at the end of its useful life. The equipment did not perform satisfactorily and the company spent $15,000 a year ago to upgrade. It is recommended by the plant engineer that the laced with equipment now. If the equipment is replaced equipment be either upgraded now for another $15,000 or repl now, it can be sold for $10,000. In conducting a replacement analysis, the cost of the defender to be used is equal to: (5 pts) (A) $45,000 (B) $10,000 (C) S21,000 (D) $15,000

Explanation / Answer

Cost of Defender to be used is equal to

(B) $10000

Reason: The cost of defender is the estimated market value of the equipment and in this question th estimated market value of equipment is $10000. Hence, Cost of defender is $10000.

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