1. Purinton Company is considering replacing a metal cutting machine with a newer model.

Here are the data the management accountant prepares for the existing (old) machine and the replacement (new) machine:

	Old	New
Original Cost	$1,000,000	$600,000
Useful Life	5 Years	2 Years
Current Age	3 Years	0 Years
Remaining Useful Life	2 Years	2 Years
Accumulated Depreciation	$600,000	n.a.
Current Disposal Value	$40,000	n.a.
Terminal Disposal Value	$0	$0
Annual Operating Costs	$800,000	$460,000
Annual Revenues	$1,100,000	$1,100,000

Purinton Corporation uses straight-line depreciation. Ignore the time value of money and income taxes. Should Purinton replace its old machine?