$3$

Exercise $12-44($Static$)$ Identifying Relevant Cash Flows; Asset Replacement Decision $[12-3,12-8]$

Assume that it is January $1,2022,$ and that the Mendoza Company is considering the replacement of a machine that has been used for the past $3$ years in a special project for the company. This project is expected to continue for an additional $5$ years $($i$.$e$.,$ until the end of

$4$ points

References

$.$ Mendoza will either keep the existing machine for another $5$ years $(8$ years total$)$ or replace the existing machine now with a new model that has a $5-$year estimated life. Pertinent facts regarding this decision are as follows:

$\backslash$table$[[,$Keep Existing Machine,Purchase New Machine$],[\backslash$table$[[$Purchase price of machine $($including transportation,$],[$setup charges, etc.$)]],,],[$Useful life $($determined at time of acquisition$),8130,000$ years,$$190,6$ years$],[$Estimated salvage value, end of $2026**,$$$20,000,$$$25,000$