Price Industries purchased a piece of milling equipment four years ago for $149,

Question

Price Industries purchased a piece of milling equipment four years ago for $149,000 and, at the beginning of last year, spent $11,000 to update the equipment with the latest technology. The company no longer uses this equipment in its current operations and has received an offer of $110,000 from a firm that would like to purchase it. Price is debating whether to sell the equipment or to expand its operations so that the equipment can be used. When evaluating the expansion option, what value, if any, should the firm assign to this equipment as an initial cost of the project?

$0

$21,000

$89,000

$110,000

Explanation / Answer

yes the answer is 110000 since if the company decided to go a ahead with the current machine they losing the offer of 110000 they recieved

hence intital cost = 110000

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