How old is the present machine

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Reference no: EM13913096

A machine which cost 240 K$ to purchase, has depreciated linearly to 80K$. It has a remaining useful life of 4 years, and the disposal cost which stands at 8K$ presently, shall be reduced to 0$ at the end of this time. Available on the market now is a new machine, which will reduce the present operating costs of 150K$ per annum by 40%, whose purchase price is 120K$, useful life is four years, and whose disposal cost will be 2K$ at the end of its useful life. The sales revenue of 300K$ per annum will remain unchanged throughout the time, regardless of the machine used.

Required:

How old is the present machine?

Should this operation retain the old machine, or convert to the new one, if they want to maximize their profits? Show by relevant calculations and by writing income statement.

Reference no: EM13913096

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