Question: Alden Ltd is evaluating the purchase of a new machine
Alden Ltd. is evaluating the purchase of a new machine that will cost $422,000. The existing machine is worth $110,000. The total number of units the firm can produce with the old machine is 200,000. The new machine will result in production increasing by 75,000 units. All production is sold at a price of $6.00 per unit. The total costs of production with the old machine are $3.50 per unit. With the new machine costs will decline by $0.40 per unit. Using marginal analysis, should Alden replace the current machine?
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