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1. On January 1, 2017 Tranko Company purchased a new stitching machine for $100,000. The machine was expected to last 4 years, at which time
1. On January 1, 2017 Tranko Company purchased a new stitching machine for $100,000. The machine was expected to last 4 years, at which time it would be worthless. On 1/1/2018, a new model of the stitching machine came out and Tranko is trying to decide whether or not to trade in the old model for the new one. Either model will be used for the next three years. The following additional information is available: Old model $100,000 4 years $60,000 $30,000 New model $150,000 3 years Purchase price Useful life Book value l rade-in value now Disposal value at end of $0 $5,000 $20,000 Useful life Annual operating expense $80,000 Using the net present value method with a discount rate of 10%, what is the cost of keeping the old machine vS. buying the new machine? Should Tranko keep the old model or trade it in for the new model
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