Darcy Roofing is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large homes and commercial properties. Last year, Darcy Roofing spent $73,800 refurbishing the lift. It has just determined that another $41,000 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $173,500. The company estimates that both lifts would have useful lives of 6 years. The new lift is more efficient and thus would reduce operating expenses by about $24,600 per year. Darcy Roofing could also rent out the new lift for about $10,000 per year. The old lift is not suitable for rental. The old lift could currently be sold for $25,500 if the new lift is purchased.

Darcy Roofing is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large homes and commercial properties. Last year, Darcy Roofing spent $73,800 refurbishing the lift. It has just determined that another $41,000 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $173,500. The company estimates that both lifts would have useful lives of 6 years. The new lift is more efficient and thus would reduce operating expenses by about $24,600 per year. Darcy Roofing could also rent out the new lift for about $10,000 per year. The old lift is not suitable for rental. The old lift could currently be sold for $25,500 if the new lift is purchased. Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Retain Equipment Replace Equipment Net Income Increase (Decrease) Operating expenses 147600 0 147600 Repair costs 41000 0 41000 x Rental revenue 0 -10000 10000 New machine cost 0 173500 -173500 Sale of old machine 0 -25500 25500 x Total cost 188600 138000 50600 Should company repair or replace the equipment? X should not v The equipment be replaced