Bradford Inc. is considering replacing one of its old factory equipment with a new one. The following data are available: Old equipment: Purchase cost $50,000 Remaining useful life in years 5 years Current book value $25,000 Annual operating costs $8,000 per year Current expected selling price $10,000 Expected sales commission 5% of the selling price New equipment: Purchase cost $52,000 Useful life in years 5 years Residual value $0 Annual operating costs $3,000 per year What would be the differential impact on income from replacing the equipment in five years? Group of answer choices $17,000 decrease $25,000 increase $17,500 decrease $27,500 increase
Bradford Inc. is considering replacing one of its old factory equipment with a new one. The following data are available: Old equipment: Purchase cost $50,000 Remaining useful life in years 5 years Current book value $25,000 Annual operating costs $8,000 per year Current expected selling price $10,000 Expected sales commission 5% of the selling price New equipment: Purchase cost $52,000 Useful life in years 5 years Residual value $0 Annual operating costs $3,000 per year What would be the differential impact on income from replacing the equipment in five years? Group of answer choices $17,000 decrease $25,000 increase $17,500 decrease $27,500 increase
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Bradford Inc. is considering replacing one of its old factory equipment with a new one. The following data are available:
| Old equipment: | |
| Purchase cost | $50,000 |
| Remaining useful life in years | 5 years |
| Current book value | $25,000 |
| Annual operating costs | $8,000 per year |
| Current expected selling price | $10,000 |
| Expected sales commission | 5% of the selling price |
| New equipment: | |
| Purchase cost | $52,000 |
| Useful life in years | 5 years |
| Residual value | $0 |
| Annual operating costs | $3,000 per year |
What would be the differential impact on income from replacing the equipment in five years?
Group of answer choices
$17,000 decrease
$25,000 increase
$17,500 decrease
$27,500 increase
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