Wildhorse Roofing is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large homes and commercial properties. Last year, Wildhorse Roofing spent $72,000 refurbishing the lift. It has just determined that another $37,500 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $160,000. The company estimates that both lifts would have useful lives of 5 years. The new lift is more efficient and thus would reduce operating expenses from $101,000 to $77,000 each year. Wildhorse Roofing could also rent out the new lift for about $9,500 per year. The old lift is not suitable for rental. The old lift could currently be sold for $23,500 if the new lift is purchased. The new lift and old lift are estimated to have salvage values of zero if used for another 5 years.

Prepare an incremental analysis showing whether the company should repair or replace the equipment. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Retain Equipment		Replace Equipment		Net Income Increase (Decrease)
Operating expenses		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
Repair costs		enter a dollar amount		enter a dollar amount		enter a dollar amount
Rental revenue		enter a dollar amount		enter a dollar amount		enter a dollar amount
New machine cost		enter a dollar amount		enter a dollar amount		enter a dollar amount
Sale of old machine		enter a dollar amount		enter a dollar amount		enter a dollar amount
Total cost		$enter a total amount		$enter a total amount		$enter a total amount

Should company repair or replace the equipment?

The equipment select an option shouldshould not be replaced.