$(15300)
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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Question
Waterway Industries is considering the replacement of a piece of equipment with a newer model. The following data has been collected:
Old Equipment | New Equipment | ||
Purchase price | $229500 | $382500 | |
91800 | - 0 - | ||
Annual operating costs | 306000 | 244800 |
If the old equipment is replaced now, it can be sold for $61200. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years. The company uses straight-line depreciation with a zero salvage value for all of its assets.
For the 5-year period, what is the increase or decrease in net income associated with the new equipment?
$91800`
$(76500)
$(15300)
$61200
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