2. LF Manufacturing is deciding whether to keep or replace an old machine. It obtains the following...
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2. LF Manufacturing is deciding whether to keep or replace an old machine. It obtains the following information: (SEE DATA TABLE) LF Manufacturing uses straight-line depreciation. Ignore the time value of money and income taxes. Should
LF Manufacturing replace the old machine? Explain.
Data Table Old Machine New Machine Original cost $ 10,900 $ 8,200 Useful life 10 years 3 years Current age 7 years 0 years Remaining useful life 3 years 3 years Accumulated depreciation $ 7,630 Not acquired yet Book value $ 3,270 Not acquired yet Current disposal value (in cash) $ 2,700 Not acquired yet 0 Terminal disposal value (3 years from now) $ $ 0 Annual cash operating costs $ 17,500 $ 14,500 Keep Replace Difference Total relevant costs
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