Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Tesla management are trying to decide whether to keep an older piece of machinery or buy a replacement. Management was presented with the following
Tesla 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 $309,000 and has a current book value using straight-line depreciation of $193,000. The old machine incurs operating expenses of $34,000 per year. The current disposal value of the old machine is $77,000; if it is kept eleven more years, its remaining value would be $13,000. The replacement machine would cost $236,000 and have a useful life of eleven years. The replacement machine has an expected salvage value of $67,000 after eleven years. The replacement machine would require $10,000 per year in operating expenses. Required Calculate the total costs in keeping the old machine and purchase a new machine. Should the old machine be replaced? Keep Old Purchase New Machine Machine Total costs Should the old machine be replaced?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To determine whether Tesla should keep the old machine or purchase a new one well calculate the tota...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