Question

Do It! Review 20-5

Darcy Roofing is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large homes and commercial properties. Last year, Darcy Roofing spent $69,600 refurbishing the lift. It has just determined that another $34,500 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $146,000. The company estimates that both lifts would have useful lives of 6 years. The new lift is more efficient and thus would reduce operating expenses by about $23,200 per year. Darcy Roofing could also rent out the new lift for about $8,500 per year. The old lift is not suitable for rental. The old lift could currently be sold for $21,500 if the new lift is purchased.

Prepare an incremental analysis for the life of the machines showing whether the company should replace the equipment

Answer 1