Question
Five years ago, Snazzy Shirts purchased a printing machine for $10,000 with an expected useful life of ten years, and an annual operating cost of
Five years ago, Snazzy Shirts purchased a printing machine for $10,000 with an expected useful life of ten years, and an annual operating cost of $8,000. The machine now has a remaining undepreciated book value of $4,000 and is still functional but largely obsolete, with a zero salvage value. The upgraded version of the machine can now be purchased for $12,000, with an expected useful life of five years, and an annual operating cost of $7,000. Snazzy is deciding if it should continue to use its outdated machine or purchase the new one. In a differential analysis of these options, the net advantage (disadvantage) of purchasing the new machine would be:
($11,000) | ||
($7,000) | ||
$1,000 | ||
$3,000 |
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