70.2K

Verified Solution

Link Copied!

PLEASE SHOW COMPLETE SOLUTION

2. Machine A was purchased last year for P500,000 and had an estimated salvage value of P75,000 at the end of its five-year life. Annual operating costs are P20,000. The machine will perform satisfactorily over the next thirteen years. A salesperson for another company is offering a replacement, Machine B, for P380,000, with a salvage value of P80,000 after thirteen years. Annual operating costs for Machine B will only be P14,000. Using the following methods for replacement analysis, which would be better, to replace Machine A or not. a. ROR on Additional Investment b. Annual Cost Method c. Equivalent Uniform Annual Cost Method d. Capitalized Cost Method 2. Machine A was purchased last year for P500,000 and had an estimated salvage value of P75,000 at the end of its five-year life. Annual operating costs are P20,000. The machine will perform satisfactorily over the next thirteen years. A salesperson for another company is offering a replacement, Machine B, for P380,000, with a salvage value of P80,000 after thirteen years. Annual operating costs for Machine B will only be P14,000. Using the following methods for replacement analysis, which would be better, to replace Machine A or not. a. ROR on Additional Investment b. Annual Cost Method c. Equivalent Uniform Annual Cost Method d. Capitalized Cost Method

Answer & Explanation Solved by verified expert

See Answer