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Jimbob Co. is considering two alternatives to replace some existing manufacturing equipment. The following data...

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Accounting

Jimbob Co. is considering two alternatives to replace some existing manufacturing equipment. The following data have been gathered concerning these two alternatives:
Machine A Machine B
Purchase cost new $300,000 $300,000
Overhaul costs needed year 4 $10,00020,000
Annual cash operating costs $130,000 $120,000
Salvage value at the end of 8 years $20,000 $30,000
Jimbob Co. uses a 10% discount rate and the incremental cost approach to capital budgeting analysis. Both alternatives are expected to have a useful life of eight years.
Which of the above costs are not relevant to the comparison of the alternatives?
Multiple Choice
Annual cash operating costs.
Purchase cost new.
Salvage value at the end of 8 years.
Overhaul costs needed year 4.

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