Question: 1. The ABC Company is trying to decide between keeping an existing machine and replacing it with a new machine. The old machine was purchased

1. The ABC Company is trying to decide between keeping an existing machine and replacing it with a new machine.

The old machine was purchased just two years ago for

$50,000 and had an expected life of 10 years. It now costs

$1,000 a month for maintenance and repairs due to a mechanical problem. A new machine is being considered to replace it at a cost of $60,000. The new machine is more efficient and it will only cost $200 a month for maintenance and repairs. The new machine has an expected life of 10 years. In deciding to replace the old machine, which of the following factors, ignoring income taxes, should ABC not

consider?

a. Any estimated salvage value on the old machine.

b. The original cost of the old machine.

c. The estimated useful life of the new machine.

d. The lower maintenance cost on the new machine.

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