2.59 You are the Production Manager at Nortel Communications. The Vice-President of Operations has asked you to prepare an analysis to determine if Nortel should be replacing one of the robotic welders used in the production assembly line, this robotic welder was purchased eight years ago for $630,000 and has seven years of useful life remaining. The new welder, costing $370,000, is expected. to have a useful life equal to the remaining useful life of the current welder and a zero disposal value. Nortel Communications incurs annual operating costs equal to $73,000 with the existing equipment, but a new robotic welder is expected to result in operating costs equal to $36,500. Nortel expects to incur additional maintenance expense on the existing welder over the remainder of its seven year life as follows: $5,000 per year in the first three years, $6,000 per year in years 4 and 5, and $8,000 per year in years 6 and 7 Because the existing robotic welder is a highly customized piece of equipment and, due to the limited second-hand market for such a unique machine, you are hesitant to consider this option to purchase a new robotic welder because the current one could only be sold for 50% of its current book value of $294,000, resulting in a loss on disposal of $147.000 Required: Ignoring income taxes and time value of money, prepare a quantitative analysis of the best course of action for the compnay, with regard to the two alternatives Net savings from buying new machine Which is the best course of action for Nortel Communications, with regard to the two alternatives? O Keep the existing machine) O Replace the existing machine with the new machine - 201 You are the Production Manager at Nortel Communications The Vice President of Operations has asked you to prepare an analysis to determine it Nortel should be replacing one of the robotic welders used in the production assembly line, this robotic welder was purchased eight years ago for $630,000 and has seven years of useful life remaining. The new welder, costing $370,000, is expected to have a useful life equal to the remaining useful life of the current welder and a zero disposal value. Nortel Communications incurs annual operating costs equal to $73,000 with the existing equipment, but a new robotic welder is expected to result in operating costs equal to $36,500. Nortel expects to incur additional maintenance expense on the existing welder over the remainder of its seven-year life as follows: $5,000 per year in the first three years, $6,000 per year in years 4 and 5, and $8,000 per year in years 6 and 7 Because the existing robotic welder is a highly customized piece of equipment and, due to the limited second-hand market for such a unique machine, you are hesitant to consider this option to purchase a new robotic welder because the current one could only be sold for 50% of its current book value of $294,000, resulting in a loss on disposal of $147,000 Required: Ignoring income taxes and time value of money, prepare a quantitative analysis of the best course of action for the compnay, with regard to the two alternatives. Nat savings from buying new machine Which is the best course of action for Nortel Communications, with regard to the two alternatives? OKeep the existing machine O Replace the existing machine with the new machine