Asset replacement decision
Rainger Company is considering replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows.
Existing Equipment | Replacement Equipment |
| |
Cost | $120,000 | Cost | $105,000 |
Operating expenses* | 120,000 | Operating expenses* | 95,000 |
Salvage value | 30,000 | Salvage value | 20,000 |
Market value | 60,000 | Useful life | 8 years |
Book value | 33,000 |
|
|
Remaining useful life | 8 years |
|
|
*The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment.
Required
Based on this information, recommend whether to replace the equipment. Support your recommendation
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