Asset replacement decision Tidwell Fishing Tours, Inc., owns a boat that originally cost $98,000. Currently, the boat’s net book value is $25,000, and its expected remaining useful life is four years. Tidwell has an opportunity to purchase for $72,000 a replacement boat that is extremely fuel efficient. Fuel costs for the old boat are expected to be $12,000 per year more than fuel costs would be for the replacement boat. Tidwell could sell the old boat, which is fully paid for and in good condition, for only $32,000.
Required Should Tidwell replace the old boat with the new fuel-efficient model, or should it continue to use the old one until it wears out? Explain.