this is a 2 part questionExercise 23-10 (Algo) Keep or replace LO P5Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and aremaining useful life of five years. It can be sold now for $59,000. Variable manufacturing costs are $49,000 per year for this oldmachine Information on two alternative replacement machines follows The expected useful life of each replacement machine is fiveyears.Purchase priceVariable manufacturing costs per year(a) Compute the income increase or decrease from replacing the old machine with Machine A(b) Compute the income increase or decrease from replacing the old machine with Machine B(c) Should Lopez keep or replace its old machine?(d) If the machine should be replaced, which new machine should Lopez purchase?Req AComplete this question by entering your answers in the tabs below.RevenuesMachine A: Keep or Replace AnalysisReq BCompute the income increase or decrease from replacing the old machine with Machine A. (Amounts to be deducted should beindicated with a minus sign.)CostsSale of existing machinePurchase of new machineVariable manufacturing costsIncome (loss)Req ACostsReq BReq C and DMachine B. Keep or Replace AnalysisRevenuesSale of existing machineReq C and DPurchase of new machineVariable manufacturing costsIncome (loss)Complete this question by entering your answers in the tabs below.Machine A$ 125,00020,000$$KeepKeepMachine B$ 137,00013,0000 $DCompute the income increase or decrease from replacing the old machine with Machine B. (Amounts to be deducted should beindicated with a minus sign.)0$Income Increase(Decrease) fromReplacing0Req C and D >

In order to make a keep or replacement decision, firstly we need to calculate the benefit of each…

Exercise 23-10 (Algo) Keep or replace LO P5 Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and a remaining useful life of five years. It can be sold now for $59,000 Variable manufacturing costs are $49,000 per year for this old machine Information on two alternative replacement machines follows The expected useful life of each replacement machine is five years Purchase price Variable manufacturing costs per year Machine A $ 125,000 20,000 Machine B $ 137,000 13,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A (b) Compute the income increase or decrease from replacing the old machine with Machine B (c) Should Lopez keep or replace its old machine? (d) if the machine should be replaced, which new machine should Lopez purchase?

Exercise 23-10 (Algo) Keep or replace LO P5 Lopez Company is considering replacing one of its old manufacturing machines. The old machine has a book value of $49,000 and a remaining useful life of five years. It can be sold now for $59,000 Variable manufacturing costs are $49,000 per year for this old machine Information on two alternative replacement machines follows The expected useful life of each replacement machine is five years Purchase price Variable manufacturing costs per year Machine A $ 125,000 20,000 Machine B $ 137,000 13,000 (a) Compute the income increase or decrease from replacing the old machine with Machine A (b) Compute the income increase or decrease from replacing the old machine with Machine B (c) Should Lopez keep or replace its old machine? (d) if the machine should be replaced, which new machine should Lopez purchase?

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 13PROB

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