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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 $314,000 and has a current book value using straight-line depreciation of $180,000. - The old machine incurs operating expenses of $39,000 per year. - The current disposal value of the old machine is $71,000; if it is kept eleven more years, its remaining value would be $20,000. - The replacement machine would cost $229,000 and have a useful life of eleven years. - The replacement machine has an expected salvage value of $62,000 after eleven 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
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