Question
A machine purchased three years ago for $85,000 has a current book value using straight-line depreciation of $55,000; its operating expenses are $14,000 per year.
A machine purchased three years ago for $85,000 has a current book value using straight-line depreciation of $55,000; its operating expenses are $14,000 per year. The current disposal value of the old machine is $30,000; if it is kept 5 (five) more years, its residual value would be $5,000. A replacement machine would cost $100,000, have a useful life of 5 (five) years, and would require $4,000 per year in operating expenses. It has an expected salvage value of $10,000 after 5 (five) years.
Required: Based on this information, should the old machine is replaced? Support your answer with appropriate documentation.
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