Jones management are trying to decide whether to keep an older piece of machinery or buy a replacement. Management was presented with the following information to assist in their decision: The old machine was purchased three years ago for $316,000 and has a current book value using straight-line depreciation of $185,000. The old machine incurs operating expenses of $37,000 per year. The current disposal value of the old machine is $88,000; if it is kept nine more years, its remaining value would be $18,000. The replacement machine would cost $234,000 and have a useful life of nine years. The replacement machine has an expected salvage value of $78,000 after nine years. The replacement machine would require $10,000 per year in operating expenses. How do i Calculate the total costs in keeping the old machine and purchase a new machine.

	Keep old machine	Purchase new machine
Total Costs
keep or replace ?		yes or no?