Six years ago, China Exporters paid cash for a new packaging machine that cost $

Q: Six years ago, China Exporters paid cash for a new packaging machine that cost $

Hi, Please find the detailed answer as follows: 125500 (Option C) is the correct answer. Notes: 125500 is the opportunity cost for the firm if it will not be used. Hence, we will take it as the value to be assigned to the machine and included in the initial costs. Maintenance and repairs were incurred 3 years back and hence are of no relevance today. Thanks.

ID: 2661097 • Letter: S

Question

Six years ago, China Exporters paid cash for a new packaging machine that cost $287,000. Three years ago, the firm spent $3,900 on repairs and modifications to the machine. The machine is now fully depreciated and has just sat idly in a back corner of the shop for the past seven months. The estimated value of the machine today is $125,500. The firm is considering using this machine in a new project. If it does so, what value should be assigned to this machine and included in the initial costs of the new project?

$0
$3,900
$125,500
$127,400
$143,500

Explanation / Answer

Hi,

Please find the detailed answer as follows:

125500 (Option C) is the correct answer.

Notes:

125500 is the opportunity cost for the firm if it will not be used. Hence, we will take it as the value to be assigned to the machine and included in the initial costs. Maintenance and repairs were incurred 3 years back and hence are of no relevance today.

Thanks.

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Six years ago, China Exporters paid cash for a new packaging machine that cost $

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