Jimbob Co is considering two alternatives to replace some existing manufacturing equipment. The following data have been gathered concerning these two alternatives:
Machine A Machine B
Purchase cost new $ $
Overhaul costs needed year $
Annual cash operating costs $ $
Salvage value at the end of years $ $
Jimbob Co uses a discount rate and the incremental cost approach to capital budgeting analysis. Both alternatives are expected to have a useful life of eight years.
Which of the above costs are not relevant to the comparison of the alternatives?
Multiple Choice
Annual cash operating costs.
Purchase cost new.
Salvage value at the end of years.
Overhaul costs needed year
