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
$252,000
$420,000
Accumulated depreciation
$100,800
$0
Annual operating costs
$336,000
$268,800
If the old equipment is replaced now, it can be sold for $67,200.
Both the old equipment's remaining useful life and the new equipment's useful life are 5 years.
For this question only, assume that six months ago Chung's equipment manager spent $33,600 refurbishing the old equipment.
Additionally, the equipment manager has determined that the new equipment can be rented out during idle periods to generate $2,016 per year. Using this new information, what is the total cash flow associated with replacing the equipment?
($50,400)
($352,800)
($376,320)
($342,720)
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
$256,500
$427,500
Accumulated depreciation
$102,600
$0
Annual operating costs
$342,000
$273,600
If the old equipment is replaced now, it can be sold for $68,400.
Both the old equipment's remaining useful life and the new equipment's useful life are 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?
$102,600
$(85,500)
$(17,100)
$68,400
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
$370,000
$740,000
Accumulated Depreciation
$111,000
$0
Remaining useful life
10 years
0
Useful life
0
10 years
Annual operating costs
$295,000
$222,000
If the old machine is replaced, it can be sold for $29,600. 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
$(7,400)
$(74,000)
$19,600
$29,500