Evaluate the sunk cost, Evaluate the total and annualized

Evaluate the sunk cost

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Reference no: EM136108

Picasso Industries is allowing for replacing an old piece of machinery, which cost $150,000 and has $70,000 of accumulated depreciation to date, with a brand new machine that costs $175,000. The old equipment could be sold for $60,000. The annual variable production costs related with the old machine are estimated to be $95,000 for eight years. The yearly variable production costs for the new machine are computed to be $72,000 for eight years.

a. Evaluate the total and annualized differential loss or income anticipated from replacing the old machine. Enter all amounts as positive numbers.

b. Evaluate the sunk cost in this situation?

Reference no: EM136108

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