12 Direct materials 15 Direct labour Share of allocated overhead Old Machine New Machine $40,000 $36,000...

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12 Direct materials 15 Direct labour Share of allocated overhead Old Machine New Machine $40,000 $36,000 7,000 5,000 3 Total Costs 9,000 $56,000 5,000 $46,000 If the new machine is purchased, the old machine will be sold for its current salvage value of $20,000 whereas if the new machine is not purchased, the old machine will be disposed of in 4 years at a predicted salvage value of $2,000. The old machine has a present book value of $40,000. If kept, in one year the old machine will require estimated repairs of $25,000. The firms cost of capital is 10%. Present value factors at 10% are provided below. Year PV of $1 PV of Annuity of $1 1 0.909 0.909 2 0.826 1.736 3 0.751 2.487 4 0.683 3.170 Required: Showing all relevant calculations in good presentation form, should the machine be purchased. Why or why not? 12 Direct materials 15 Direct labour Share of allocated overhead Old Machine New Machine $40,000 $36,000 7,000 5,000 3 Total Costs 9,000 $56,000 5,000 $46,000 If the new machine is purchased, the old machine will be sold for its current salvage value of $20,000 whereas if the new machine is not purchased, the old machine will be disposed of in 4 years at a predicted salvage value of $2,000. The old machine has a present book value of $40,000. If kept, in one year the old machine will require estimated repairs of $25,000. The firms cost of capital is 10%. Present value factors at 10% are provided below. Year PV of $1 PV of Annuity of $1 1 0.909 0.909 2 0.826 1.736 3 0.751 2.487 4 0.683 3.170 Required: Showing all relevant calculations in good presentation form, should the machine be purchased. Why or why not?