Reference no: EM131003041
HiTek Engineering purchased 8 computer workstations from Lemon Technologies late last year. Last week, the government announced a standard format for computer-based drawings and spec- i?cations. Unfortunately, none of the various software packages that currently meet that standard will run on the 8 Lemons. Last year, the machines cost $250K (K stands for thousands), includ- ing software. Buying new Lemons would cost $190K today. If HiTek sells the Lemons on the used-machine market, HiTek would receive only $80K. If HiTek buys new workstations from another vendor, the 8 Lemons could be shifted to another use, which has a value of $90K.
Which of the following arguments on what to do with the old machines when new ones are purchased is true?
• Argument 1. HiTek must sell the Lemons, because it cannot justify using $190K worth of machines for a $90K use.
• Argument 2. HiTek must keep the Lemons, because it cannot afford to lose $110K (= $190K - $80K) by selling them.
• Argument 3. HiTek cannot afford to sell the Lemons, because then it would be admitting that it made a $250K mistake.
• Argument 4. Even though the alternative use is worth only $90K, HiTek should keep the Lemons, since they will be worth only $80K if sold.
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