costs from $576,600 to $470,500. Prepare an analysis showing whether the st two columns, enter costs and expenses as positive amounts, and any amounts rece ome increases as positive amounts and decreases as negative amounts. Enter negati reg.-45 or parentheses e.g. (45).) Retain Equipment $ Replace Equipment JUL Net Inco Increase (De-
costs from $576,600 to $470,500. Prepare an analysis showing whether the st two columns, enter costs and expenses as positive amounts, and any amounts rece ome increases as positive amounts and decreases as negative amounts. Enter negati reg.-45 or parentheses e.g. (45).) Retain Equipment $ Replace Equipment JUL Net Inco Increase (De-
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...
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Question
![Ivanhoe Company has a factory machine with a book value of $88,100 and a remaining useful life of 7 years. It can be sold for $33,800.
A new machine is available at a cost of $510,700. This machine will have a 7-year useful life with no salvage value. The new machine
will lower annual variable manufacturing costs from $576,600 to $470,500. Prepare an analysis showing whether the old machine
should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative
amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using
either a negative sign preceding the number eg. -45 or parentheses e.g. (45).)
Variable manufacturing costs $
New machine cost
Sell old machine
Total
Retain
Equipment
The old factory machine should be replaced
Replace
Equipment
000
Net Income
Increase (Decrease)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1948c2ea-e06a-480b-88b5-9b82e13a7913%2F85758c50-6870-46d0-a967-306a99b446e9%2F4r6bzo_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Ivanhoe Company has a factory machine with a book value of $88,100 and a remaining useful life of 7 years. It can be sold for $33,800.
A new machine is available at a cost of $510,700. This machine will have a 7-year useful life with no salvage value. The new machine
will lower annual variable manufacturing costs from $576,600 to $470,500. Prepare an analysis showing whether the old machine
should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative
amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using
either a negative sign preceding the number eg. -45 or parentheses e.g. (45).)
Variable manufacturing costs $
New machine cost
Sell old machine
Total
Retain
Equipment
The old factory machine should be replaced
Replace
Equipment
000
Net Income
Increase (Decrease)
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