Granfield Company has a piece of manufacturing equipment with a book value of $49,500 and a remaining useful life of four years. At the end of the four years the equipment will have a zero-salvage value. Granfield can purchase new equipment for $177,000 and receive $29,600 in return for trading in its current equipment. The current equipment has variable manufacturing costs of $58,000 per year. The new equipment will reduce variable manufacturing costs by $28,500 per year over its four-year life. The total increase or decrease in income by replacing the current equipment with the new equipment would be?

a. $33,400 decrease

b. $114,000 increase

c. $16,100 decrease

d. $77,650 increase

e. $33,400 increase

Answer rating: 100% (QA)

Firstly calculate the net cost of replacement by subtracting the tradein value f... View the full answer