Nathan T Corporation is comparing two different options. Nathan T currently uses Option 1, with revenues of $65,000 per year, maintenance expenses of $5,000 per year, and operating expenses of $26,000 per year. Option 2 provides revenues of $60,000 per year, maintenance expenses of $5,000 per year, and operating expenses of $22,000 per year. Option 1 employs a piece of equipment which was upgraded 2 years ago at a cost of $17,000. If Option 2 is chosen, it will free up resources that will bring in an additional $4,000 of revenue. Complete the following table to show the change in income from choosing Option 2 versus Option 1. Designate Sunk costs with an “S.”
Nathan T Corporation is comparing two different options. Nathan T currently uses Option 1, with revenues of $65,000 per year, maintenance expenses of $5,000 per year, and operating expenses of $26,000 per year. Option 2 provides revenues of $60,000 per year, maintenance expenses of $5,000 per year, and operating expenses of $22,000 per year. Option 1 employs a piece of equipment which was upgraded 2 years ago at a cost of $17,000. If Option 2 is chosen, it will free up resources that will bring in an additional $4,000 of revenue. Complete the following table to show the change in income from choosing Option 2 versus Option 1. Designate Sunk costs with an “S.”
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 18P
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Question
Nathan T Corporation is comparing two different options. Nathan T currently uses Option 1, with revenues of $65,000 per year, maintenance expenses of $5,000
per year, and operating expenses of $26,000 per year. Option 2 provides revenues of $60,000
per year, maintenance expenses of $5,000 per year, and operating expenses of $22,000 per
year. Option 1 employs a piece of equipment which was upgraded 2 years ago at a cost of
$17,000. If Option 2 is chosen, it will free up resources that will bring in an additional
$4,000 of revenue. Complete the following table to show the change in income from
choosing Option 2 versus Option 1. Designate Sunk costs with an “S.”
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