Question: Replace machine: Frederick, Inc. is considering replacing a machine. The following data are available: Replacement Old Machine Machine Original cost $45,000 $35,000 Useful life in

Replace machine:

Frederick, Inc. is considering replacing a machine. The following data are available:

Replacement

Old Machine Machine

Original cost $45,000 $35,000

Useful life in years 10 5

Current age in years 5 0

Book value $25,000

Disposal value now $8,000

Disposal value in 5 years 0 0

Annual cash operating costs $7,000 $4,000

Required:

a. Which of the data provided in the table is a sunk cost?

b. The difference between keeping the old machine and replacing the old machine is:

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