Benson company is considering the replacement of a machine

Reference no: EM13567862

Benson Company is considering the replacement of a machine that is presently used in production. The following data are available:

Old Machine New Machine

Original cost $57,000 $35,000

Useful life in years 17 5

Current age in years 12 0

Book value $39,000 -

Disposal value now $8,000 -

Disposal value in 5 years 0 0

Annual cash operating costs $7,000 $4,000

A) Adding all five years together, the total relevant costs to consider if the new machine is purchased is ________.

B) Adding all five years together, the total relevant costs to consider if the old machine is not replaced is ________.

C) Adding all five years together, what is the difference in total relevant costs between the old machine and the new machine?

D) Should the old machine be replaced?

Reference no: EM13567862

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