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 information
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 $304,000 and has a current book value using straig htline depreciation of $184,000. - The old machine incurs operating expenses of $39,000 per year. - The current disposal value of the old machine is $86,000; if it is kept nine more years, its remaining value would be $17,000. - The replacement machine would cost $222,000 and have a useful life of nine years. - The replacement machine has an expected salvage value of $77,000 after nine years. - The replacement machine would require $9,000 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? Should the old machine be replaced
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