Question
A machine purchased three years ago for $317,000 has a current book value using straight-line depreciation of $180,000; its operating expenses are $36,000 per year.
A machine purchased three years ago for $317,000 has a current book value using straight-line depreciation of $180,000; its operating expenses are $36,000 per year. A replacement machine would cost $230,000, have a useful life of nine years, and would require $11,000 per year in operating expenses. It has an expected salvage value of $64,000 after nine years. The current disposal value of the old machine is $75,000; if it is kept 9 more years, its residual value would be $20,000. (Please provide step by step instructions for all and also on how you determine that operating expenses)
Required
Calculate the total costs in keeping the old machine and purchase a new machine. Should the old machine be replaced?
1) What is the total coast to keep old machine ?
2) What is the total coast to purchase new machine?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started