Jorgensen Company Is Considering the Replacement of Equipment Used in Operations.The

question 58

Essay

Jorgensen Company is considering the replacement of equipment used in operations.The following data are available:
$\begin{array}{lll}&\text { Old Machine }&\text { NEW Machine }\\\text { Original cost } & \$ 210,000 & \$ 40,000 \\\text { Useful life in years } & 12 & 7 \\\text { Current age in years } & 5 & 0 \\\text { Book value } & \$ 65,000 & -\\\text { Disposal value now } & \$ 30,000 & - \\\text { Disposal value in } 7 \text { years } & 0 & 0 \\\text { Annual cash operating costs } & \$ 9,000 & \$ 8,000\end{array}$
Required:
A) Prepare a cost comparison for replacing the old equipment. Use only relevant items and add the items together for the next 7 years.
B) Should the old equipment be replaced?

• A) Prepare a cost comparison for replacing the old equipment. Use only relevant items and add the items together for the next 7 years.
• B) Should the old equipment be replaced?

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Definitions:

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A technical document that summarizes the performance and other technical characteristics of a product, machine, component, material, or software in detail.