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a Canton Movie Theatre is considering selling its old popcorn machine and replacing it with a...

a Canton Movie Theatre is considering selling its old popcorn machine and replacing it with a newer one. The old machine originally cost $5,000 and has been fully depreciated. Annual costs are $3,500. Canton high school is willing to buy it for $1,000. New equipment would cost $18,000 and annual operating costs would be $1,500. The new machine has an estimated useful life of 5 years, and the old machine will last another 5 years. Please Prepare a proposal and determine if we should replace the old equipment.

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Answer #1

Solution : The company should retain the old popcorn machine

Decision whether to replace or retain the old machine

Cost Savings ( $ 3500-$ 1500)* 5 years                                     $ 10,000

New Equipment Cost ($18,000)

Less Salvage Value Of the old Machine $ 1000

Net Cash Inflow ( $ 7000)

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