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Lake Area Hospital relies on its x-ray machine for appropriate diagnosis of patients. Last year the company spent $60,000 refurbishing the machine. A sales
Lake Area Hospital relies on its x-ray machine for appropriate diagnosis of patients. Last year the company spent $60,000 refurbishing the machine. A sales rep approached Lake Area regarding the purchase of a new x-ray machine, which would cost $490,000. If the hospital purchases the new x-ray machine, it could sell the old one for $100,000. The hospital estimates that both the old and new x-ray machines will have useful lives of 4 years before they would be obsolete. The hospital feels the operating expenses of the old machine is $225,000 per year, and the new x-ray machine is much lower at $114,500. Prepare an incremental analysis as to whether the hospital should repair and retain the old machine or purchase the new one. Retain Replace Net Income +/-
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