Reference no: EM131760145
Question: Machine Replacement Decision
A company is considering replacing an old piece of machinery, which cost $2,000,000 and has $1,173,000 of accumulated depreciation to date, with a new machine that costs $1,503,600. The old equipment could be sold for $237,600. The annual variable production costs associated with the old machine are estimated to be $751,100 for six years. The annual variable production costs for the new machine are estimated to be $518,300 for six years.
a. Determine the total and annualized differential income or loss anticipated from replacing the old machine.
Net differential _________________ $ _________________
Annual differential _________________ $ _________________
b. What is the sunk cost in this situation?
$ _________________ , _________________
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