"roblem 9-1 Making an Equipment Replacement Decision (LO1 - CC2) antosh Plastics Inc. purchased a new machine one year ago at a cost of $81,000. Although the machine operates well and ha ore years of operating life, the president of Santosh Plastics is wondering if the company should replace it with a new electro achine that has just come on the market. he new machine costs $121,500 and is expected to slash the current annual operating costs of $56,700 by two-thirds. The ne achine is expected to last for five years, with zero salvage value at the end of five years. The current machine can be sold fo 3,500 if the company decides to buy the new machine. The company uses straight-line depreciation. trying to decide whether to purchase the new machine, the president has prepared the following analysis: Book value of the old machine Less: Salvage value Net loss from disposal $67,500 13,500 $54,000 ven though the new machine looks good," said the president, "we can't get rid of that old machine if it means taking a huge We'll have to use the old machine for at least a few more years." les are expected to be $283,500 per year, and selling and administrative expenses are expected to be $170,100 per year, gardless of which machine is used. quired: Prepare a comparative income statement covering the next five years, assuming: The new machine is not purchased. The new machine is purchased. egative amounts should be indicated by a minus sign. Do not round intermediate calculations.)