Mailman Company Is Considering the Replacement of a Machine That

Essay

Mailman Company is considering the replacement of a machine that is presently used to produce its single product. The following data are available: $\begin{array}{lll}&& \text { Replacement } \\&\text { Old Machine } & \text { Machine }\\\text { Original cost } & \$ 210,000 & \$ 40,000 \\\text { Useful lif e in years } & 12 & 7 \\\text { Current age in years } & 5 & 0 \\\text { Book value } & \$ 65,000 & - \\\text { Disposal value now } & \$ 30,000 & - \\\text { Disposal value in 7 years } & 0 & 0 \\\text { Annual cash op erating } & \$ 10,000 & \$ 9,000\\ \text { costs}\end{array}$ Required:
Ignoring income taxes, prepare a cost comparison of all relevant items for the next seven years together. Indicate the best alternative for Mailman Company.