If sold now, the current sewing machine would have a salvage value of $15,200. If it is used for the remainder of its useful life, thecurrent sewing machine would have zero salvage value. The new sewing machine is expected to have zero salvage value after 7 years.Determine whether the current sewing machine should be replaced. (Ignore the time value of money.) (If an amount reduces the netincome then enter with a negative sign preceding the number, e.g.-15,000 or parenthesis, e.g. (15,000).)Incremental incomeNew machine costProceeds from sale of old machineNet incremental savingsThe companyRetainreplace the sewing machine.ReplaceIncremental cost savings Waterway Inc. has an industrial sewing machine that it has used for the past 5 years. The company is considering replacing themachine with a faster model as it is starting to break down more often. As it will be faster and eliminate overtime, it will increaseoperating income by $4,300 per year over its useful life of 7 years.Original purchase costAccumulated depreciationRemaining useful lifeCurrent Machine$47,800$22,9007 yearsNew Machine$25,3007 yearsIf sold now, the current sewing machine would have a salvage value of $15,200. If it is used for the remainder of its useful life, thecurrent sewing machine would have zero salvage value. The new sewing machine is expected to have zero salvage value after 7 years.

When an organization already possesses a certain asset and is contemplating changing with something…

Determine whether the current sewing machine should be replaced. (Ignore the time value of money.) (If an amount reduces the net income then enter with a negative sign preceding the number, eg.-15,000 or parenthesis, e.g. (15,000).) Replace Incremental income New machine cost Proceeds from sale of old machine Net incremental savings Retain Incremental cost savings

Determine whether the current sewing machine should be replaced. (Ignore the time value of money.) (If an amount reduces the net income then enter with a negative sign preceding the number, eg.-15,000 or parenthesis, e.g. (15,000).) Replace Incremental income New machine cost Proceeds from sale of old machine Net incremental savings Retain Incremental cost savings

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 16P

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