It is a true statement that as <span>capital investment levels off business spending decreases and leads to a possible contraction to the economy. The correct option among all the options that are given in the question is the first option. I hope that this is the answer that has actually come to your help.</span>
Answer: Old machine should be replaced.
Explanation:
The variable manufacturing cost will reduce by:
= 624,000 - 524,000
= $100,000
Over a period of 5 years this will be:
= 100,000 * 5
= $500,000
Selling the old machine would bring in $32,000:
= 500,000 + 32,000
= $532,000
The cost of the new machine would reduce this gross benefit by:
= 532,000 - 455,100
= $76,900
<em>Net income will increase by a total of $76,900 over the 5 year period if the new machine is bought so it should be bought. </em>
Numerous number of consumers or buyers protects a firm from being forced to sell its products at an unfairly low price. This is one of the important reasons that a firm can sell its product at a good price. If the competition increases, then the firm has to beat the competition to get the required price, otherwise it might have to lower its price to hold on to its consumers.
