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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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