Nguyen Company is contemplating the replacement of an old machine with a new one

Question

Nguyen Company is contemplating the replacement of an old machine with a new one. The following information has been gathered Machine New Machine $3,000 Purchase price Accumulated depreciation Annual operating costs Remaining useful life $7,400 $4,700 $3,800 10 years 0 $5,200 10 years If the old machine is replaced, it can be sold for $3,600. Both the old equipment and new equipment have a useful life of 10 years. What is the net advantage (disadvantage) of replacing the old machine with the new machine? O ($13,400) $17,000 ($17,000) $13,400

Explanation / Answer

Old Machine New Machine Annual operating costs $38,000 $52,000 Purchase price $3,000 Sales Price ($3,600) Total Cost $38,000 $51,400 Disadvantage of replacing the old machine with the new machine ($13,400)

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