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Exercise 6-18A Asset replacement decision LO 6-5 A machine purchased three years ago for $302,000 has a current book value using straight-line depreciation of $189,000;
Exercise 6-18A Asset replacement decision LO 6-5 A machine purchased three years ago for $302,000 has a current book value using straight-line depreciation of $189,000; its operating expenses are $37,000 per year. A replacement machine would cost $221,000, have a useful life of nine years, and would require $9,000 per year in operating expenses. It has an expected salvage value of $78,000 after nine years. The current disposal value of the old machine is $87,000; if it is kept 9 more years, its residual value would be $14,000. Required Calculate the total costs in keeping the old machine and purchase a new machine. Should the old machine be replaced? Answer is complete but not entirely correct. Purchase Machine Machine $ 319,000 137,000 Keep Old New Total costs Should the old machine be replaced? Yes
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