A company is considering replacing an old piece of machinery, which cost $597,100 and has $352,000 of accumulated depreciation to date, with a new machine that has a purchase price of $484,900. The old machine could be sold for $64,000. The annual variable production costs associated with the old machine are estimated to be $155,100 per year for eight years. The annual variable production costs for the new machine are estimated to be $99,700 per year for eight years. a. Prepare a differential analysis dated April 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign. Differential Analysis Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2) April 29 Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effect on Income (Alternative 2) Revenues: Proceeds from sale of old machine $fill in the blank dd0f47f71fc3fa5_1 $fill in the blank dd0f47f71fc3fa5_2 $fill in the blank dd0f47f71fc3fa5_3 Costs: Purchase price fill in the blank dd0f47f71fc3fa5_4 fill in the blank dd0f47f71fc3fa5_5 fill in the blank dd0f47f71fc3fa5_6 Variable productions costs (8 years) fill in the blank dd0f47f71fc3fa5_7 fill in the blank dd0f47f71fc3fa5_8 fill in the blank dd0f47f71fc3fa5_9 Income (Loss) $fill in the blank dd0f47f71fc3fa5_10 $fill in the blank dd0f47f71fc3fa5_11 $fill in the blank dd0f47f71fc3fa5_12 Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. b. What is the sunk cost in this situation? The sunk cost is $fill in the blank 0097b9064065074_1.

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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A company is considering replacing an old piece of machinery, which cost $597,100 and has $352,000 of accumulated depreciation to date, with a new machine that has a purchase price of $484,900. The old machine could be sold for $64,000. The annual variable production costs associated with the old machine are estimated to be $155,100 per year for eight years. The annual variable production costs for the new machine are estimated to be $99,700 per year for eight years.

a. Prepare a differential analysis dated April 29 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Differential Analysis
Continue with Old Machine (Alt. 1) or Replace Old Machine (Alt. 2)
April 29
	Continue with Old Machine (Alternative 1)	Replace Old Machine (Alternative 2)	Differential Effect on Income (Alternative 2)
Revenues:
Proceeds from sale of old machine	$fill in the blank dd0f47f71fc3fa5_1	$fill in the blank dd0f47f71fc3fa5_2	$fill in the blank dd0f47f71fc3fa5_3
Costs:
Purchase price	fill in the blank dd0f47f71fc3fa5_4	fill in the blank dd0f47f71fc3fa5_5	fill in the blank dd0f47f71fc3fa5_6
Variable productions costs (8 years)	fill in the blank dd0f47f71fc3fa5_7	fill in the blank dd0f47f71fc3fa5_8	fill in the blank dd0f47f71fc3fa5_9
Income (Loss)	$fill in the blank dd0f47f71fc3fa5_10	$fill in the blank dd0f47f71fc3fa5_11	$fill in the blank dd0f47f71fc3fa5_12

Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine.

b. What is the sunk cost in this situation?

The sunk cost is $fill in the blank 0097b9064065074_1.

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