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Determine the total and annualized differential income

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Problem - Machine Replacement Decision - Creekside Products Inc. is considering replacing an old piece of machinery, which cost $315,000 and has $130,000 of accumulated depreciation to date, with a new machine that costs $275,000. The old machine could be sold for $140,000. The annual variable production costs associated with the old machine are estimated to be $30,000 for eight years. The annual variable production costs for the new machine are estimated to be $9,000 for eight years.

Required -

a. Determine the total and annualized differential income or loss anticipated from replacing the old machine.

b. What is the sunk cost in this situation?

Reference no: EM132708053

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