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Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $45,000 and a remaining useful life of five years. It can be sold now for $55,000. Variable manufacturing costs are $50,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year Machine A $ 117,000 19,000 Machine B $ 131,000 15,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Complete this question by entering your answers in the tabs below. Req A Req B Req C and D Machine A: Keep or Replace Analysis Keep Compute the income increase or decrease from replacing the old machine with Machine A. Note: Amounts to be deducted should be indicated with a minus sign. Replace Income Increase (Decrease) from Replacing Revenues Sale of existing machine $ 55,000 Costs Purchase of new machine 117,000 Variable manufacturing costs 95,000 Income (loss) $ 55,000 $ 212,000 $ 157,000 Req A Req B >

Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $45,000 and a remaining useful life of five years. It can be sold now for $55,000. Variable manufacturing costs are $50,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year Machine A $ 117,000 19,000 Machine B $ 131,000 15,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Complete this question by entering your answers in the tabs below. Req A Req B Req C and D Machine A: Keep or Replace Analysis Keep Compute the income increase or decrease from replacing the old machine with Machine A. Note: Amounts to be deducted should be indicated with a minus sign. Replace Income Increase (Decrease) from Replacing Revenues Sale of existing machine $ 55,000 Costs Purchase of new machine 117,000 Variable manufacturing costs 95,000 Income (loss) $ 55,000 $ 212,000 $ 157,000 Req A Req B >

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
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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Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $45,000 and a remaining useful life of five years. It can be sold now for $55,000. Variable manufacturing costs are $50,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year Machine A $ 117,000 19,000 Machine B $ 131,000 15,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Complete this question by entering your answers in the tabs below. Req A Req B Req C and D Machine A: Keep or Replace Analysis Keep Compute the income increase or decrease from replacing the old machine with Machine A. Note: Amounts to be deducted should be indicated with a minus sign. Replace Income Increase (Decrease) from Replacing Revenues Sale of existing machine $ 55,000 Costs Purchase of new machine 117,000 Variable manufacturing costs 95,000 Income (loss) $ 55,000 $ 212,000 $ 157,000 Req A Req B >
Transcribed Image Text:Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $45,000 and a remaining useful life of five years. It can be sold now for $55,000. Variable manufacturing costs are $50,000 per year for this old machine. Information on two alternative replacement machines follows. The expected useful life of each replacement machine is five years. Purchase price Variable manufacturing costs per year Machine A $ 117,000 19,000 Machine B $ 131,000 15,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A. (b) Compute the income increase or decrease from replacing the old machine with Machine B. (c) Should Lopez keep or replace its old machine? (d) If the machine should be replaced, which new machine should Lopez purchase? Complete this question by entering your answers in the tabs below. Req A Req B Req C and D Machine A: Keep or Replace Analysis Keep Compute the income increase or decrease from replacing the old machine with Machine A. Note: Amounts to be deducted should be indicated with a minus sign. Replace Income Increase (Decrease) from Replacing Revenues Sale of existing machine $ 55,000 Costs Purchase of new machine 117,000 Variable manufacturing costs 95,000 Income (loss) $ 55,000 $ 212,000 $ 157,000 Req A Req B >
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