The Treene company is considering replacing its old machine with a book value of 75,000...
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The Treene company is considering replacing its old machine with a book value of 75,000 and still having a remaining useful life of 5 years. The old machine will be replaced with a new one that will cost 250,000, will have a 5-year useful life and no salvage value. The annual operating costs of the old machine amount to 90,000 that can be reduced by 60% if a new machine is acquired. The old machine would require reconditioning that will cost 10,000 if not replaced which will be incurred before it starts operations. The old machine will have zero disposal value after 5 years but can be disposed now at 20,000. Required: ignoring the time value of money and income taxes, determine the relevant and differential costs. ( Quantify for 5-year period)
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