Bryan Inc. is considering replacing one of its older factory…
Bryan Inc. is considering replacing one of its older factory machines with a new machine. Both the old and new machine have estimated remaining lives of 5 years, however the new machine is easier to operate. The company’s old machine cost $305,000 and has a current net book value of $180,000. The direct labor costs needed to operate the machine is $40,000 per year. The old machine has no residual (salvage) value and is custom for Bryan Inc. so it cannot be sold to another company. A new machine costs $237,000 and requires direct labor costs of $6,000 per year. The new machine has an expected residual (salvage) value of $81,000 after five years. Should the company keep the old or purchase the new machine? Consider only the quantitative factors when making your decision.