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2 Problem 9-1 Making an Equipment Replacement Decision (LO1- CC2) Santosh Plastics...

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Accounting

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Problem 9-1 Making an Equipment Replacement Decision (LO1- CC2)
Santosh Plastics Inc. purchased a new machine one year ago at a cost of $66,000. Although the machine operates well and has five more years of operating life, the president of Santosh Plastics is wondering if the company should replace it with a new electronic machine that has just come on the market.
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The new machine costs $99,000 and is expected to slash the current annual operating costs of $46,200 by two-thirds. The new machine is expected to last for five years, with zero salvage value at the end of five years. The current machine can be sold for $11,000 If the company decides to buy the new machine. The company uses straight-line depreciation.
In trying to decide whether to purchase the new machine, the president has prepared the following analysis:
\table[[Book value of the old machine,$55,000
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