Problem 4 (3 points) The capital budgeting commitee of the Richmond Steel Corporation is evaluating the possibility of replacing its old pipe-bending machine with a more advanced Information on the existing machine and the new model follows: Existing machine New machine Original cost Market value now Market value in year 5 Annual cash operating costs Remaining life $200,000 80,000 $400,000 40,000 5 yrs. 20,000 10,000 5 yrs. A. The major opportunity cost associated with the continued use of the existing machine is: B. What are the sunk cost(s) in this decision? C. What is the incremental cost to purchase the new machine? D. If the company buys the new machine and disposes of the existing machine, calculate the effect on the corporate profit. E. What would you recommend that the company do? Page 5 of 5