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Current Attempt in Progress Carta Vista Company is considering the purchase of a new mithine. The invoice price of the machine is $160,000, freight charges are estimated to be $5,000, and installation conts are expected to be $7.000. Salvage value of the new equipment is expected to be zero after a useful life of 5 years Existing equipment could be retained and used for an additional 5 years if the new machine is not purchased At that time the salvage value of the equipment would be zero. If the new machine is purchased now, the existing machine would have to be scrapped Carla Vista's accountant. Lisah Huang has accumulated the following data regarding annual sales and expenses with and without the new machine 1 Without the new machine. Aurora can sell 14.000 units of product annually at a per unit selling price of $100. If the new machine is purchased the number of units produced and sold would increase by 10%, and the selling price would remain the same 2 The new machine is taster than the old machine and it is more efficient in its usage of materials. With the old machine the pross profit rate will be 25% of sales, whereas the rate will be 30% of sales with the new machine. Annual selling expenses are $205,000 with the current equipment. Because the new equipment would produce a greater number of units to be sold annual selling expenses are expected to increase by 10% if it is purchased. Annual administrative expenses are expected to be $114,000 with the old machine and $129,000 with the new machine. The current book value of the existing machine is $41.000. Carla Vista uses straight-line depreciation 5 Retain Old Machine Purchase New Machine Net Income Increase (Decrease) Sales $ $ Costs and expenses Cost of goods sold Selling expenses Administrative expenses Purchase price Total costs and expenses Net Income I Should Cars Vistake the dating machine or buy the new machine? Carta Vista should

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