Marquise Co. processes diamonds. The grinder used was bought a year ago and had a useful life of 4 years when it was purchased. The sales weasels have contacted Marquise because the new model of grinder has just come out. It is more efficient because of several technological advances and has an expected useful life of 3 years. If the new grinder is purchased, the sales weasel will buy back the old grinder for $10,000. The associated costs are shown below: Current Grinder New Grinder Original Purchase Cost $75,000 $95,000 Accumulated Depreciation $18,750 --- Estimated annual operating costs $90,000 $61,000 (3 points) - Prepare an incremental analysis to determine whether the current machine should be replaced. (1 point) - Should the existing grinder be retained or replaced? (1 point) - Would the answer change if the sales weasel paid $7,500 instead of the current $10,000 offer? (1 point) - How much would the sales weasel have to pay for the existing grinder to make the same decision?

Answer rating: 100% (QA)

Incremental Analysis Replacing Grinder Costs DescriptionCurrent Grinder Year 4New Grinder Original P... View the full answer