Candy Colors is a locally owned business producing various school clothing. Candy has a clothing machine which was acquired ten years ago at a cost of $$50,000.$ The machines was expected to have a ten year useful life with no salvage value if sold at the end of the tenth year.

The actual current market value of the equipment is $$2,000.$ Straight$-$line depreciation was used. In addition to the annual depreciation of $$5,000,$ Candy incurs $$10,000$ of annual operating costs to operate the machine. A salesperson has approached Candy$$s owner, Candice Stripes $($an MBA graduate of our institution$),$ with an opportunity to purchase a new machine. The new machine costs less than the previous one at only $$25,000$ and Candice is assured that the annual operating costs are less at only $$8,000$ annually. The one caveat is that it will only be operable for $2$ years before it needs to be replaced. The salvage value will be zero at the end of the second year.

After hearing the offer, Candice is upset with the opportunity and indicates it is not an option for her company. You, as a current student of our institution, want the opportunity to review the numbers and discuss with Candice after your analysis.

Blog your analysis and thoughts. What costs and other items are relevant for your decision? Back it up with financials.