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Standard Machine Parts Ltd makes specialized machine parts for several customers, all of whom are major manufactures. Standard is considering replacing one of the
Standard Machine Parts Ltd makes specialized machine parts for several customers, all of whom are major manufactures. Standard is considering replacing one of the special machines used in production of a specific product. Estimates for the next three years are as follows: Average Annual Sales Annual Operating costs BV of old machine List Price New machine Old Machine New Machine $240,000.00 $260,000.00 $ 50,000.00 $ 47,500.00 $ 7,000.00 $ 75,000.00 Remaining life Expected life Disposal value now 3 years 3 years $12,000 $0 Disposal value in 3 years Required: $0 Based strictly on the financial information presented above, should Standard Machine Parts Ltd. replace the old machine now? (Ignore time value of money). 4 Marks
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