McKee Company is considering replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows.

Required:
Based on this information, recommend whether to replace the equipment. Support your recommendation with appropriate computations.

Transcribed Image Text:

Existing Equipment Replacement Equipment Cost $ 90,000 Cost $95,000 Operating expenses* 105,000 Operating expenses* 20,000 Salvage value 10,000 Salvage value 14,000 Market value 60,000 Useful life 8 years Book value 32,000 Remaining useful life 8 years