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Santosh Plastics Inc. purchased a new machine one year ago at a cost of $75,000. Although the machine operates well and has five more years

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Santosh Plastics Inc. purchased a new machine one year ago at a cost of $75,000. Although the machine operates well and has five more years of operating life, the president of Santosh Plastics is wondering if the company should replace it with a new electronic machine that hasjust come on the market. The new machine costs $112,500 and is expected to slash the current annual operating costs of $52,500 by two-thirds. The new machine is expected to last for five years, with zero salvage value at the end of five years. The current machine can be sold for $12,500 if the company decrdes to buy the new machine. The company uses straight-line depreciation. In trying to decide whether to purchase the new machine, the president has prepared the following analysis: 'Book value of the, old machine $62,500 Less: Salvage value 12,500 Net loss from disposal $50,000 \"Even though the new machine looks good,\" said the president, \"we can't get rid of that old machine if it means taking a huge loss on it. We'll have to use the old machine for at least a few more years." Sales are expected to be $262,500 per year, and selling and administrative expenses are expected to be $157,500 per year, regardless of which machine is used. Required: ' , 1. Prepare a comparative income statement covering the next five years, assuming: k a. The new machine is not purchased. b. The new machine is purchased. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations.)

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