Question: That old equipment for producing subassemblies is worn out, said Mr. Paul Adom, president of Ebeyeyie Ghana Limited (EGL). We need to make a decision

That old equipment for producing subassemblies is worn out, said Mr. Paul Adom, president of Ebeyeyie Ghana Limited (EGL). We need to make a decision quickly. The company is trying to decide whether it should purchase new equipment and continue to make its subassemblies internally or whether it should discontinue production of its subassemblies and purchase them from an outside supplier. The alternatives are: Alternative 1: New equipment for producing the subassemblies can be purchased at a cost of GH1,750,000. The equipment would have a five-year useful life (the company uses straight-line depreciation method) and a GH250,000 salvage value.

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