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A company is considering replacing an old piece of machinery, which cost $598,100 and has $350,000 of accumulated depreciation to dele, with a new machine that has a purchase price of $454,000. The old machine could be sold for $61,000. The annual variable production costs associated with the old machine are estimated to be $155,500 per year for 8 years. The annual variable production costs for the new machine are estimated to be $98,800 per year for 8 years. a.1 Prepare a differential analysis dated December 10 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "o". If required, use a minus sign to indicate a loss Differential Analysis Continue with (Alt. 1) or Replace (Alt. 2) Old Machine December 10 Line Item Description Revenues; Proceeds from sale of old machine Costs Purchase price Variable productions costs (8 years) Proft (less) Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Replace the old machine Differential Effects (Alternative 2) Dedy For the continue and replace alternatives subtract the costs from the revenues Humply the variable production costs for the eight year sife. Determine the afferential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2. a.2 Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine

A company is considering replacing an old piece of machinery, which cost $598,100 and has $350,000 of accumulated depreciation to dele, with a new machine that has a purchase price of $454,000. The old machine could be sold for $61,000. The annual variable production costs associated with the old machine are estimated to be $155,500 per year for 8 years. The annual variable production costs for the new machine are estimated to be $98,800 per year for 8 years. a.1 Prepare a differential analysis dated December 10 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "o". If required, use a minus sign to indicate a loss Differential Analysis Continue with (Alt. 1) or Replace (Alt. 2) Old Machine December 10 Line Item Description Revenues; Proceeds from sale of old machine Costs Purchase price Variable productions costs (8 years) Proft (less) Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Replace the old machine Differential Effects (Alternative 2) Dedy For the continue and replace alternatives subtract the costs from the revenues Humply the variable production costs for the eight year sife. Determine the afferential effect on income of the revenues, costs, and income (loss) by subtracting alternative 1 from alternative 2. a.2 Determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine

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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A company is considering replacing an old piece of machinery, which cost $598,100 and has $350,000 of accumulated depreciation to date, with a new machine that has a purchase price of $484,000. The old machine could be sold for $61,000. The annual variable production costs associated with the old machine are estimated to be $155,500 per year for 8 years. The annual variable production costs for the new machine are estimated to be $98,800 per year for 8 years. a-1 Prepare a differential analysis dated December 10 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss Differential Analysis Continue with (Alt. 1) or Replace (Alt. 2) Old Machine December 10 Line Item Description Revenues Proceeds from sale of old machine Costs Purchase price Variable productions costs (8 years) Proft (less) Feedback Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effects (Alternative 2) Ched My For the continue and replace alternatives subtract the costs from the revenues Humply the variable production costs for the eight year sife. Determine the differential effect on income of the revenues, costs, and income (loss) by suttracting alternative 1 from alternative 2. a.2 Determee whether to continue with (Alternative 1) or replace (Alternative 2) the old machine Replace the old machine
Transcribed Image Text:A company is considering replacing an old piece of machinery, which cost $598,100 and has $350,000 of accumulated depreciation to date, with a new machine that has a purchase price of $484,000. The old machine could be sold for $61,000. The annual variable production costs associated with the old machine are estimated to be $155,500 per year for 8 years. The annual variable production costs for the new machine are estimated to be $98,800 per year for 8 years. a-1 Prepare a differential analysis dated December 10 to determine whether to continue with (Alternative 1) or replace (Alternative 2) the old machine. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss Differential Analysis Continue with (Alt. 1) or Replace (Alt. 2) Old Machine December 10 Line Item Description Revenues Proceeds from sale of old machine Costs Purchase price Variable productions costs (8 years) Proft (less) Feedback Continue with Old Machine (Alternative 1) Replace Old Machine (Alternative 2) Differential Effects (Alternative 2) Ched My For the continue and replace alternatives subtract the costs from the revenues Humply the variable production costs for the eight year sife. Determine the differential effect on income of the revenues, costs, and income (loss) by suttracting alternative 1 from alternative 2. a.2 Determee whether to continue with (Alternative 1) or replace (Alternative 2) the old machine Replace the old machine
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