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The machine your firm currently uses produces a unit of good at a cost of $5 per unit and a profit per unit of $3
The machine your firm currently uses produces a unit of good at a cost of $5 per unit and a profit per unit of $3. The current machine costs $4,500, but is already paid for. A new machine can produce a unit of good at a cost of $3 per unit and a profit of $5. The new machine costs $10,000. In the capital budgeting analysis (NPV) the cash-flows would be $3 per unit for the O $14,500 for the cost positive cash-flow $5 per unit for the O $14,500 for the cost positive cash-flow O $10,000 for the cost positive cash-flow $2 per unit for the o $10,000 for the cost positive cash-flow $5 per unit for the
Expert Solution
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correct answer is option = $10,000 for the cost $2 per unit for positive cash flow.
This is because $10,000 is only the relevant cost here. Incremental cash flow per unit is $5-$3= $2. Therefore answer is option = $10,000 for the cost $2 per unit for positive cash flow.
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