Lui Co. is considering disposal of a night vision glasses manufacturing machine with a book value of $12,500 and estimated remaining life of five years. The old machine can be sold for $1,500. A new high-speed machine can be purchased from Lecter Co. at a cost of $25,000. It will have a useful life of five years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $26,000 to $23,500 if the new machine is purchased. The total net differential increase or decrease in cost for the new equipment for the entire five years is: Increase of $11,000. Decrease of $11,000. Increase of $15,000. Decrease of $15,000.
Lui Co. is considering disposal of a night vision glasses manufacturing machine with a book value of $12,500 and estimated remaining life of five years. The old machine can be sold for $1,500. A new high-speed machine can be purchased from Lecter Co. at a cost of $25,000. It will have a useful life of five years and no residual value. It is estimated that the annual variable manufacturing costs will be reduced from $26,000 to $23,500 if the new machine is purchased. The total net differential increase or decrease in cost for the new equipment for the entire five years is: Increase of $11,000. Decrease of $11,000. Increase of $15,000. Decrease of $15,000.
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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Lui Co. is considering disposal of a night vision glasses manufacturing machine with a book
value of $12,500 and estimated remaining life of five years. The old machine can be sold for $1,500. A new high-speed machine can be purchased from Lecter Co. at a cost of $25,000. It will have a useful life of five years and no residual value. It is estimated that the annual variable
- Increase of $11,000.
- Decrease of $11,000.
- Increase of $15,000.
- Decrease of $15,000.
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