Bramble Inc. has an industrial sewing machine that it has used for the past 5 years. The company is considering replacing the machine with a faster model as it is starting to break down more often. As it will be faster and eliminate overtime, it will increase operating income by $4,450 per year over its useful life of 7 years. Original purchase cost Accumulated depreciation Remaining useful life Incremental income. Current Machine $44,000 $19,700 7 years New machine cost If sold now, the current sewing machine would have a salvage value of $15,300. If it is used for the remainder of its useful life, the current sewing machine would have zero salvage value. The new sewing machine is expected to have zero salvage value after 7 years. Determine whether the current sewing machine should be replaced. (Ignore the time value of money) (If an amount reduces the net income then enter with a negative sign preceding the number, e.g.-15,000 or parenthesis, eg. (15,000)) New Machine $26,200 Proceeds from sale of old machine 7 years Retain Replace Incremental cost savings

Bramble Inc. has an industrial sewing machine that it has used for the past 5 years. The company is considering replacing the machine with a faster model as it is starting to break down more often. As it will be faster and eliminate overtime, it will increase operating income by $4,450 per year over its useful life of 7 years. Original purchase cost Accumulated depreciation Remaining useful life Incremental income. Current Machine $44,000 $19,700 7 years New machine cost If sold now, the current sewing machine would have a salvage value of $15,300. If it is used for the remainder of its useful life, the current sewing machine would have zero salvage value. The new sewing machine is expected to have zero salvage value after 7 years. Determine whether the current sewing machine should be replaced. (Ignore the time value of money) (If an amount reduces the net income then enter with a negative sign preceding the number, e.g.-15,000 or parenthesis, eg. (15,000)) New Machine $26,200 Proceeds from sale of old machine 7 years Retain Replace Incremental cost savings

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 18P: Filkins Fabric Company is considering the replacement of its old, fully depreciated knitting...

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