Halls Medical Labs makes medical examining tables for hospitals. The current equipment used to manufacture the tables has a book value of $250,000. Halls is considering replacing the existing equipment because it will increase the company’s production capacity by 500 tables per year. Currently, Halls is operating at full capacity and is not able meet all of the demand for its tables. The cost of the new equipment is $500,000 and the manufacturer will provide a $45,000 trade-in for the old equipment. The tables sell for $2,000 each and have variable costs of $500 each. What is the cost or benefit of purchasing the new equipment if they expect to recoup the cost in one year?
- $455,000 cost
- $45,000 benefit
- $295,000 benefit
- $545,000 benefit