considering a number Company follows PA Relevant Costs and Differential Analysis LO1, 2 $900,000 Cornerstone Bank paid 590.000 for a check-sorting machine 10 years ago this month. The machine had a estimated life of 15 years and annual operating costs of $40.000, excluding depreciation. Although management is pleased with the machine, recent technological advances have made check-sorting ma chines obsolete. Consequently, the machine now has a book value of $30,000, a remaining operating life of five years, and a salvage value of $0. The manager of operations is evaluating a proposal to acquire check scanning equipment for all hranches. The new equipment would cost $50,000 and reduce annual operating costs to $20.000, ex- cluding depreciation. Because of expected technological improvements, the manager believes the new machine will have an economic life of four years and no salvage value at the end of that life. Prior to signing the papers authorizing the acquisition of the new machine, the president of the bank prepared the following analysis 000 00 00 20 (312.000) 688,000 Six-year savings [($40,000 - $20,000) 4 years) Cost of new machine Loss on disposal of old machine Advantage (disadvantage) of replacement. $80,000 (50,000) (30.000) $ 0 (600.000) $(12.000 by S4 per unit y S12.000 per After looking at these numbers, the manager rejected the proposal and commented that he was tired of looking at marginal projects. This bank is in business to make a profit, not to break even. If you want to break even, go work for the government." Required a. Evaluate the president's analysis. b. Prepare a differential analysis of six-year totals for the old and the new machines. c. Speculate on some limitations of the model or other issues that might be a factor in making a final decision 3.0XX0 units, ed. This will ative costs by