B File Edit View Insert Format Tools Data Window Help C 1 Upgrade Replace 2 One-time equipment costs $2 700 000 $4 200 000 3 Variable manufacturing cost per desk $ 140 $ 80 4 Remaining useful life of equipment (years) 3 3 5 Terminal disposal value of equipment $ 0 $ 0 All equipment costs will continue to be depreciated on a straight-line basis. For simplicity, ignore income taxes and the time value of money. Required 1. Should TechMech upgrade its production line or replace it? Show your calculations. 2. Now suppose the one-time equipment cost to replace the production equipment is somewhat negotiable. All other data are as given previously. What is the maximum one-time equipment cost that TechMech would be willing to pay to replace the old equipment rather than upgrade it? 3. Assume that the capital expenditures to replace and upgrade the production equipment are as given in the original exercise, but that the production and sales quantity is not known. For what production and sales quantity would TechMech (a) upgrade the equipment or (b) replace the equipment? 4. Assume that all data are as given in the original exercise. Dan Marcini is TechMech's manager and his bonus is based on operating profit. Because he is likely to relocate after about a year, his current bonus is his primary concern. Which alternative would Marcini choose? Explain. B File Edit View Insert Format Tools Data Window Help C 1 Upgrade Replace 2 One-time equipment costs $2 700 000 $4 200 000 3 Variable manufacturing cost per desk $ 140 $ 80 4 Remaining useful life of equipment (years) 3 3 5 Terminal disposal value of equipment $ 0 $ 0 All equipment costs will continue to be depreciated on a straight-line basis. For simplicity, ignore income taxes and the time value of money. Required 1. Should TechMech upgrade its production line or replace it? Show your calculations. 2. Now suppose the one-time equipment cost to replace the production equipment is somewhat negotiable. All other data are as given previously. What is the maximum one-time equipment cost that TechMech would be willing to pay to replace the old equipment rather than upgrade it? 3. Assume that the capital expenditures to replace and upgrade the production equipment are as given in the original exercise, but that the production and sales quantity is not known. For what production and sales quantity would TechMech (a) upgrade the equipment or (b) replace the equipment? 4. Assume that all data are as given in the original exercise. Dan Marcini is TechMech's manager and his bonus is based on operating profit. Because he is likely to relocate after about a year, his current bonus is his primary concern. Which alternative would Marcini choose? Explain