Question

21. Shamrock is considering the replacement of a piece of equipment with a newer model. The following data has been collected:

	Old Equipment		New Equipment
Purchase price	$252000		$420000
Accumulated depreciation	100800		- 0 -
Annual operating costs	336000		268800

If the old equipment is replaced now, it can be sold for $67200. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years.

For this question only, assume that six months ago Chung’s equipment manager spent $33600 refurbishing the old equipment. Additionally, the equipment manager has determined that the new equipment can be rented out during idle periods to generate $2016 per year. Using this new information, what is the total cash flow associated with replacing the equipment?

($50400)

($352800)

($376320)

($342720)

22. Sheridan Company is considering the replacement of a piece of equipment with a newer model. The following data has been collected:

	Old Equipment		New Equipment
Purchase price	$256500		$427500
Accumulated depreciation	102600		- 0 -
Annual operating costs	342000		273600

If the old equipment is replaced now, it can be sold for $68400. Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years. The company uses straight-line depreciation with a zero salvage value for all of its assets.

For the 5-year period, what is the increase or decrease in net income associated with the new equipment?

$102600`

$(85500)

$(17100)

$68400

23. Concord Corporation is contemplating the replacement of an old machine with a new one. The following information has been gathered:

	Old Machine		New Machine
Price	$370000		$740000
Accumulated Depreciation	111000		-0-
Remaining useful life	10 years		-0-
Useful life	-0-		10 years
Annual operating costs	$295000		$222000

If the old machine is replaced, it can be sold for $29600. The company uses straight-line depreciation with a zero salvage value for all of its assets.

The net advantage (disadvantage) of replacing the old machine is

$(7400)

$(74000)

$19600

$29500

Please answer all 3 questions! Thank you!

Answer 1

The answer has been presented in the supporting sheet.