Asset replacement decision
Elrod 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 |
$ 90,000 |
Cost |
$95,000 |
|
Operating expenses* |
115,000 |
Operating expenses* |
95,000 |
|
Salvage value |
10,000 |
Salvage value |
12,000 |
|
Market value |
60,000 |
Useful life |
8 years |
|
Book value |
33,000 |
||
|
Remaining useful life |
8 years |
||
Required
Based on this information, recommend whether to replace the equipment. Support your recommendation with appropriate computations.