only two years old. It has a The TechDesk Company produces and sells 7,000 modular computer desks per year at a selling price terminal disposal value of $0 and is depreciated on a straight-line basis. The equipment has a current disposal price of $450,000. However, the emergence of a new molding technology has led TechDesk to consider either upgrading or replacing the production equipment. The following table presents data for the two altematives: s650 each. current production equipment, purchased for $1,800,000 and with a five-year useful life, E(Click to view the data for the two altematives.) All equipment costs will continue to be depreciated on a straight-line basis. For simplicity, ignore inoome taxes and the time value f money Read the requirements. Requirement 1. Should TechDesk upgrade its production line or replace it? Show your calculations. Determine the total relevant costs over 3 years. (If a box is not used in the table, leave the box empty; do not enter a zero. Use parentheses or a minus sign for numbers to be subtracted.) Over 3 years Upgrade Replace Difference Total relevant costs. Choose from any list or enter any number in the input fields and then click Check Answer. O parts remaining Clear All Check Answer Requirements 1 Should TechDesk upgrade its production line or replace it? Show your calculations. 2. Now suppose the one-time equipment cost to replace the production equipment is somewhat negotiable. All other data are as given previously. What is the maximum one-time equipment cost that TechDesk would be willing to pay to replace rather than upgrade the old equipment? 3. Assume that the capital expenditures to replace and upgrade the production equipment are as given in the original exercise, but that the production and sales quantity is not known. For what production and sales quantity would TechDesk (i) upgrade the equipment or (ii) replace the equipment? 4. Assume that all data are as given in the original exercise. Dan Doria is TechDesk's manager, and his bonus is based on operating income. Because he is likely to relocate after about a year, his current bonus is his primary concern. Which alternative would Doria choose? Explain. Data Table Upgrade Replace 2,500,000 $ 4,000,000 One-time equipment costs 145 $ Variable manufacturing cost per desk 90 Remaining useful life of equipment (years) $ 0 $ Terminal disposal value of equipment 0