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Martha Boulanger is thinking about replacing the old batch oven with a new conveyor oven that, additionally is ecofriendly. Information related to the two ovens

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Martha Boulanger is thinking about replacing the old batch oven with a new conveyor oven that, additionally is ecofriendly. Information related to the two ovens follows: Batch Oven Conveyor Oven Original cost $3 1,500 $60,000 Accumulated depreciation $9,000 Not acquired yet Book value $22,500 Not acquired yet Current disposal value $15,000 Not acquired yet Installation cost Not applicable 3,000 Annual operating cost $18,000 $7,500 Useful life 7 years 5 years Current age 2 years 0 years Remaining useful life 5 years 5 years Terminal disposal value (in 5 years) $0 $0 Ignore the effect of income taxes and the time value of money (you will learn of this in nance). Required: 1. Which of the costs and benets above are relevant to the decision to replace the oven? . What information is irrelevant? Why is it irrelevant? 2 3. Should Martha Boulanger purchase the new oven? Provide support for your answer. 4. Is there any conflict between the decision model and the incentives of the manager who has purchased the batch oven and is considering replacing it only two years later? 5. At what purchase price would Martha Boulanger be indifferent between purchasing the new oven and continuing to use the old oven

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