Six years ago, Lee Industries paid cash for a new milling machine that cost $67,

Question

Six years ago, Lee Industries paid cash for a new milling machine that cost $67,000. Three years ago, the firm spent $4,300 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 18 months. THe estimated value of the machine today is $14,500. 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 project?

Explanation / Answer

Value should be assigned to this machine and included in the initial costs of the project = $ 14500

Note : Machine should be valued at the Market Value of its Sale Price , Since the Machine can be sold at $ 14500 today, It is to be considered as relevant initial cost of machine, If there is no sale value than the Initial cost of machine would be considered as zero since machine is lying idle and has no use.

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