Question
A machine is purchased 4 years ago with a service life of 10 years. The current book value of the existing machine is 80.000 TL.
A machine is purchased 4 years ago with a service life of 10 years. The current book value of the existing machine is 80.000 TL. The company is considering replacement of the machine with a new one which will be purchased for 100.000 TL with an 8 years of service life. Annual expenses of the existing machine is 15.000 TL and it requires a repair cost of 25.000 TL at 2 years time from now on, it has no salvage value at the end of its service life. Annual expenses of the new
machine is 30.000 TL and it has a salvage value of 20.000 TL at the end of its service life. Determine if the machine should be replaced or not by using Annual Equivalent values and Comparative Use Value Method (MARR = 10%).
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