Question

di E ston The Tecido com spo e productio o n produces and 7.000 and is depreco r The Powing table present . comodedespet i ng price of $850 och ne base Thement has a cu p for the two mais of en production et p hase 1 800.000 dwth five you useful life is only the years it has wew, the emergence of wrong technology has decides to consider the prin replacing Al coscooter For r income and the value of money Helement Techow s online place it? Show your actions Det the new l y do not use parents 0 Data Table Upgrade Replace 2.800.000 $ 4,900.000 $ THEO

Answer 1

|: X fa 1 AB cash operating costs current disposal value one time capital costs total relevant costs over 3 years upgrade replace $3,150,000 $1,680,000 $ 650,000 $2,800,000 $ 4,900,000 $5,950,000 $5,930,000 difference $1,470,000 $ 650,000 $2,100,000 $20,000 decision - TechGear should REPLACE its production line reason - because relevant cost of replacing is $20,000 less than that of upgrading note - it the old equipment's current disposal value is $660,000, ther enter -$660,000 in the highlighted cell and solve accordingly.

for formulas and calculations, refer to the image below -

over 3 years upgrade replace difference cash operating costs =150*7000*3 =80*7000*3 =D4-E4 current disposal value -650000 =D5-E5 one time capital costs 2800000 4900000 =D6-E6 total relevant costs =SUM(D4:06) =SUM(E4:56) =SUM(F4:F6) decision - TechGear should REPLACE its production line reason - because relevant cost of replacing is $20,000 less than that of upgrading note - it the old equipment's current disposal value is $660,000, then enter -$660,000 in the highlighted cell and solve accordingly.

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