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Crane Company is contemplating the replacement of an old machine with a new one. The following information has been gathered: Old Machine New Machine Price

Crane Company is contemplating the replacement of an old machine with a new one. The following information has been gathered:

Old Machine New Machine
Price $200000 $400000
Accumulated Depreciation 60000 -0-
Remaining useful life 10 years -0-
Useful life -0- 10 years
Annual operating costs $165000 $120000

If the old machine is replaced, it can be sold for $16000. The company uses straight-line depreciation with a zero salvage value for all of its assets. The net advantage (disadvantage) of replacing the old machine is

(40000)

$(4000)

$16500

$66000

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