Mueller Company is considering the replacement of equipment used in operations. The following data are available: Old Equipment New Equipment Original cost $93,000 $60,000 Useful life in years 13 6 Current age in years 7 0 Book value $57,000 - Disposal value now $50,000 - Disposal value in 6 years 0 0 Annual cash operating costs $14,000 $11,000
A) Prepare a cost comparison for replacing the old equipment. Use only relevant items and add the items together for the next 6 years.
B) Should the old equipment be replaced?