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Required: GH Company is trying to decide whether to replace a current piece of machinery with a new machine. Using the below data, determine the

Required: GH Company is trying to decide whether to replace a current piece of machinery with a new machine. Using the below data, determine the relevant costs of the old machine and the new machine. Should GH Company purchase the new machine?

(25 points)

Old Machine

New machine

Original cost

100,000

Accumulated depreciation

(50,000)

Book value

50,000

Market value (now)

25,000

30,000

Salvage value (in 5 years)

5,000

8,000

Annual depreciation expense

11,000

Operating expenses

Per year

9,000

4,500

Times number of years

4

4

Total operating expenses

36,000

18,000

Your calculations here:

Relevant costs:

Old Machine

New Machine

Total

Your decision: Keep the Old Machine or Buy the New Machine? Why?

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