Question

Amanda Company is considering the replacement of a machine that is presently used in production. The following data are​ available: Old Machine New Machine Original cost ​$200,000 ​$160,000 Useful life in years 10 5 Current age in years 5 0 Book value ​$100,000 minus Disposal value now ​$32,000 minus Disposal value in 5 years 0 0 Annual cash operating costs ​$20,000 ​$14,000 Adding all five years​ together, the total relevant costs to consider if the new machine is purchased is

Answer 1

Step-by-step explanation:

New machine cost =160,000

Annual cash operating cost = 14,000

Disposal value = 32,000

Calculations:

Original cost of New Machine 160,000

Total Annual cash operating costs 70000 [14000*5 ]

Less: Disposal value of Old Machine (32,000)

Total relevant costs if the new machine is purchased 198,000