Replace the old machine with a new machine if:

Question

Quizplus · Accepted Answer

The decision to replace the old machine with a new one should be based on which machine will generate higher net cash inflows, as this will lead to greater profitability. Therefore, if the net cash inflows of the new machine are greater than the net cash inflows of the old machine (as in choice B), it would be best to replace the old machine with the new one. Additionally, the option of the NPV of replacement being negative (choice C) would also signal that the new machine would not be profitable and therefore should not replace the old machine.

Replace the Old Machine with a New Machine If