Question 21 Sew It Inc. has an industrial sewing machine that it has used for the past 5 years. The company is considering replacing the machine with a faster model as it is starting to break down more often. As it will be faster and eliminate overtime, it will increase revenues by $4,450 per year over its useful life of 7 years. Current Machine $29,900 $23,900 7 years New Machine $26,700 Original purchase cost Accumulated depreciation Useful life 7 years If sold now, the current sewing machine would have a salvage value of $5,500. If it is used for the remainder of its useful life, the current sewing machine would have zero salvage value. The new sewing machine is expected to have zero salvage value after 7 years. Determine whether the current sewing machine should be replaced. (Ignore the time value of money.) (If an amount reduces the net income then enter with a negative sign preceding the number, e.g. -15,000 or parenthesis, e.g. (15,000).) Retain Replace Incremental cost savings Incremental revenues New machine cost Proceeds from sale of old machine Net Incremental savings The company replace the sewing machine