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help Carla Vista Roofing is faced with a decision. The company relies very heavily on the use of its 60 foot extension lift for work
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Carla Vista Roofing is faced with a decision. The company relies very heavily on the use of its 60 foot extension lift for work on largo homes and commercial properties Last year, Carla Vista Roofing spent $77.400 refurbishing the lift. It has just determined that another $45.500 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $194,000. The company estimates that both lifts would have useful lives of 5 years. The new lift is more efficient and thus would reduce operating expenses from $110,000 to $84.200 each year. Carla Vista Roofing could also rent out the new lift for about $11.500 per year . The old lift is not suitable for rental. The old lift could currently be sold for $28,500 if the new lift is purchased. The new lift and old lift are estimated to have salvage values of zero if used for another 5 years. Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts usins either a negative sin preceding the number es. 45 or parentheses es (451) Retain Equipment Replace Equipment Net Income Increase (Decrease) Operating expenses 239500 $ 0 $ 0 Repair costs 45500 i 45500 Rental revenue -57500 i 57500 New machine cost 194000 i -194000 28500 1 28500 Sale of old machine -194000 1080000 86000 Total cost Should company repair or replace the equipment? The equipment should be replaced Step by Step Solution
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