An old machine that originally cost $9,500 thus far has accumulated depreciation of$1,900. The remaining useful life is four years, with no salvage value at the end of itsuseful life. A new machine is now available that costs $8,500, with a useful life of fiveyears and no residual value. The old machine could be sold now for $1,400. The annualcash operating costs for the old machine are $5,000, but for the new machine theywould be only $2,500. Gross revenue from the products would be $12,000 annually foreither machine. The company shouldA) keep the old machine to avoid a $6,200 loss on its disposal.B) replace the old machine.C) keep the old machine to avoid an $8,500 decrease in cash.D) keep the old machine to avoid a $1,400 loss on its disposal.
An old machine that originally cost $9,500 thus far has
$1,900. The remaining useful life is four years, with no salvage value at the end of its
useful life. A new machine is now available that costs $8,500, with a useful life of five
years and no residual value. The old machine could be sold now for $1,400. The annual
cash operating costs for the old machine are $5,000, but for the new machine they
would be only $2,500. Gross revenue from the products would be $12,000 annually for
either machine. The company should
A) keep the old machine to avoid a $6,200 loss on its disposal.
B) replace the old machine.
C) keep the old machine to avoid an $8,500 decrease in cash.
D) keep the old machine to avoid a $1,400 loss on its disposal.
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