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daniels corp. is considering replacing one of its production machines. the ceo feels that new machine is more efficient and hence will save costs to the company. the following information is available: old machine new machine original cost $10,000,000 $9,500,000 useful life 6 years 3 years current age 3 years 0 remaining useful life 3 years 3 years accumulated depreciation $5,000,000 book value $5,000,000 current disposal value $50,000 terminal disposal value (2 years from now) 0 $0 annual operating costs $12,000,000 $8,500,000 should daniels corp. replace the old machine? ignore the time value of money and income taxes.
Sagot :
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