Compute the net advantage or disadvantage of buying machine

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Question - Earth Star Diamonds Inc began a potentially lucrative mining operation and is considering replacing their existing mining machine with a new state-of-the-art machine. Selected data includes:


Existing Machine

New Machine

Original Cost (2 years ago)

$60,000


Purchase Price


$90,000

Selling Price if sold now (Salvage Value)

$13,400


Removal Cost if sold now

$1,400


Operating Costs per Year

$125,000

$105,000

Remaining Years of Useful Life

5

5

Salvage Value in 5 years

$0

$0

Required - Compute the net advantage or disadvantage of buying the new machine and make a recommendation.

Reference no: EM133179482

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