Answer :
Final answer:
The EUAC for keeping the old lathe is $6,737.63, while the EUAC for replacing it is $7,756.37. Therefore, it is recommended to keep the old lathe.
Explanation:
To determine whether the old lathe should be replaced now, we need to compare the EUAC (Equivalent Uniform Annual Cost) of keeping the old lathe with the EUAC of replacing it with a new one.
The EUAC considers both the initial cost and the annual costs associated with each option.
Given the information provided, the EUAC for keeping the old lathe is calculated to be $6,737.63, and the EUAC for replacing the lathe is calculated to be $7,756.37.
Since the EUAC of keeping the old lathe is less than the EUAC of replacing it, the recommendation would be to keep the old lathe.
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