Prepare a cost comparison for replacing the old equipment

Reference no: EM13601356

Geiger Company is considering the replacement of equipment used in operations. The following data are available:

Old Equipment New Equipment

Original cost $210,000 $40,000
Useful life in years 12 7
Current age in years 5 0
Book value $65,000 -
Disposal value now $30,000 -
Disposal value in 7 years 0 0
Annual cash operating costs $10,000 $9,000

Required:
A) Prepare a cost comparison for replacing the old equipment. Use only relevant items and add the items together for the next 7 years.
B) Should the old equipment be replaced?

Reference no: EM13601356

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