Trail power has been using the same machines to make its

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Trail Power has been using the same machines to make its name brand clothing for the last 5 years. A cost efficiency consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery. The old machines cost the company $350,000. The old machines presently have a book value of $135,000 and a market value of $27,000. They are expected to have a 5 year remaining life and zero salvage value. The new machines would cost the company $250,000 and have operating expenses of $18,000 a year. The new machines are expected to have a 5 year useful life and no salvage value. The operating expenses associated with the old machines are $45,000 a year. The new machines are expected to increase quality, justifying a price increase, and thereby increasing sales revenue by $25,000 a year. Select the true statement.

Reference no: EM13577315

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