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Exercise 1 0 - 1 0 ( Algo ) Keep or replace LO P 5 Lopez Company is considering replacing one of its old manufacturing
Exercise Algo Keep or replace LO P
Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $ and a remaining useful life of four years. It can be sold now for $ Variable manufacturing costs are $ per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is four years.
Machine A Machine B
Purchase price $ $
Variable manufacturing costs per year
a Compute the income increase or decrease from replacing the old machine with Machine A
b Compute the income increase or decrease from replacing the old machine with Machine B
c Should Lopez keep or replace its old machine?
d If the machine should be replaced, which new machine should Lopez purchase?
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