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D. Asset replacement Arizona Mechanical recently created a new product, a computer-controlled, laser-precise lathe, and Ohio Ornamental Metals is considering purchasing one. Ohio's CFO received the following information from the accounting department regarding the company's exist- ing lathe and the new Arizona Mechanical lathe. The savings in operating costs offered by the new lathe would mostly derive from reduced waste, reduced labor, and energy cost savings. a. b. Old Machine Original cost.. Present book value... Annual cash operating costs Fair value now Fair value in five years Remaining useful life New Machine Cost Annual cash operating costs Fair value in five years.. Useful life .... $875,000 $150,000 $450,000 $200,000 $0 5 years $1,600,000 $155,000 $0 5 years Based on financial considerations alone, should Ohio Ornamental Metals purchase the new lathe? Show computations to support your answer. What qualitative factors should Ohio Ornamental Metals consider before making a decision about purchasing the new lathe?

Asset replacement Arizona Mechanical recently created a new product, a computer-controlled, laser-precise lathe, and Ohio Ornamental Metals is considering purchasing one. Ohio's CFO received the following information from the accounting department regarding the company's existing lathe and the new Arizona Mechanical lathe. The savings in operating costs offered by the new lathe would mostly derive from reduced waste, reduced labor, and energy cost savings. a. Based on financial considerations alone, should Ohio Ornamental Metals purchase the new lathe? Show computations to support your answer. b. What qualitative factors should Ohio Ornamental Metals consider before making a decision about purchasing the new lathe

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