ABC Manufacturing has a machine with a book value of $60,000 and a remaining useful life of four years. A new machine is available at a cost of $100,000, and ABC can also receive $30,000 for trading in the old machine. The new machine will reduce variable manufacturing costs by $12,000 per year over its four-year life. Should the machine be replaced? a. Yes, because income will increase by $12,000 per year. b. Yes, because income will increase by $48,000 in total. c. No, because the company will be $20,000 worse off in total. d. No, because income will decrease by $12,000 per year. e. ABC will not be better or worse off by replacing the machine.

ABC Manufacturing has a machine with a book value of $60,000 and a remaining useful life of four years. A new machine is available at a cost of $100,000, and ABC can also receive $30,000 for trading in the old machine. The new machine will reduce variable manufacturing costs by $12,000 per year over its four-year life. Should the machine be replaced? a. Yes, because income will increase by $12,000 per year. b. Yes, because income will increase by $48,000 in total. c. No, because the company will be $20,000 worse off in total. d. No, because income will decrease by $12,000 per year. e. ABC will not be better or worse off by replacing the machine.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EA: Gardner Denver Company is considering the purchase of a new piece of factory equipment that will...

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