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Problem $9-1$ Making an Equipment Replacement Decision $($LO$1-$ CC$2)$

Santosh Plastics Inc. purchased a new machine one year ago at a cost of $$66,000.$ Although the machine operates well and has five more years of operating life, the president of Santosh Plastics is wondering if the company should replace it with a new electronic machine that has just come on the market.

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The new machine costs $$99,000$ and is expected to slash the current annual operating costs of $$46,200$ by two$-$thirds. The new machine is expected to last for five years, with zero salvage value at the end of five years. The current machine can be sold for $$11,000$ If the company decides to buy the new machine. The company uses straight$-$line depreciation.

In trying to decide whether to purchase the new machine, the president has prepared the following analysis:

$\backslash$table$[[$Book value of the old machine,$$55,000$