Darcy Roofing is faced with a decision. The company relies very
heavily on the use of its 60-foot extension lift for work on large
homes and commercial properties. Last year, Darcy Roofing spent
$76,800 refurbishing the lift. It has just determined that another
$45,000 of repair work is required. Alternatively, it has found a
newer used lift that is for sale for $190,500. The company
estimates that both lifts would have useful lives of 6 years. The
new lift is more efficient and thus would reduce operating expenses
by about $25,600 per year. Darcy Roofing could also rent out the
new lift for about $11,000 per year. The old lift is not suitable
for rental. The old lift could currently be sold for $28,000 if the
new lift is purchased.
Prepare an incremental analysis for the life of the machines
showing whether the company should replace the equipment.
| Retain Equipment | Replace Equipment | Net Income (Decrease) | |
| Operating Expenses | $__________ | $__________ | $__________ |
| Repair Costs | $__________ | $__________ | $__________ |
| Rental Revenue | $__________ | $__________ | $__________ |
| New machine cost | $__________ | $__________ | $__________ |
| Sale of old machine | $__________ | $__________ | $__________ |
| Total cost | $__________ | $__________ | $__________ |
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