E4–7 Time allowed: 10 minutes Waukee Railroad is considering the purchase of a powerful, high-speed wheel grinder to replace a standard wheel grinder that is now in use.

Selected information on the two machines is given below:

Required Prepare a computation covering the five-year period that will show the net advantage or disadvantage of purchasing the high-speed wheel grinder. Use only relevant costs in your analysis.

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Standard wheel grinder High-speed wheel grinder Original cost new 20,000 30,000 Accumulated depreciation to date 6,000 Current salvage value 9,000 Estimated cost per year to operate 15,000 7,000 Remaining years of useful life 5 years 5 years