Murl Plastics Inc. purchased a new machine one year ago at a cost of $75,000. Although the machine operates well, the president of Murl Plastics is wondering if the company should replace it with a new electronic machine that has just come on the market. The new machine would slash annual operating costs by two-thirds, as shown in the comparative data below:

Murl Plastics Inc. purchased a new machine one year ago at a cost of $75,000. Although the machine operates well, the president of Murl Plastics is wondering if the company should replace it with a new electronic machine that has just come on the market. The new machine would slash annual operating costs by two-thirds, as shown in the comparative data below: Present Proposed Machine New Machine Purchase cost new $75,000 $112,500 Estimated useful life new 6 years 5 years Annual operating costs $52,500 $ 17,500 Annual straight-line depreciation 12,500 22,500 Remaining book value 62,500 Salvage value now 12,500 Salvage value in ve years 0 0 In trying to decide whether to purchase the new machine, the president has prepared the following analysis: Book value of the old machine $62,500 Less: Salvage value 12,500 Net loss from disposal $50,000 "Even though the new machine looks good," said the president, \"we can't get rid of that old machine if it means taking a huge loss on it. We'll have to use the old machine for at least a few more years.\" Sales are expected to be $262,500 per year, and selling and administrative expenses are expected to be $157,500 per year, regardless of which machine is used. Required: 1. Prepare a summary income statement covering the next ve years, assuming the following: a.The new machine is not purchased. b.The new machine is purchased. (Leave no cells blank - be certain to enter "0" wherever required.) Required: 1. Prepare a summary income statement covering the next ve years, assuming the following: a.The new machine is not purchased. b.The new machine is purchased. (Leave no cells blank - be certain to enter "0" wherever required.) Total expenses 2. Compute the net advantage of purchasing the new product using relevant costs