Stephen Quance, president of Amtek Ironworks, is faced with a classic problem in capital budgeting: whether or not to buy a new machine to replace…

Stephen Quance, president of Amtek Ironworks, is faced with a classic problem in capital budgeting: whether or not to buy a new machine to replace existing equipment.  Amtek Ironworks makes iron castings for manufacturing use.  The Spartan Machine Molder would replace several older stamping machines and would improve quality and increase capacity for expansion.  Quance, at the request of the board of directors, is to conduct a careful analysis of the replacement proposal and recommend an investment decision to the board.