A machine purchased three years ago for $318,000 has a current book value using straight-line depreciation of $192,000; its operating expenses are $39,000 per year. A replacement machine would cost $227,000, have a useful life of nine years, and would require $10,000 per year in operating expenses. It has an expected salvage value of $71,000 after nine years. The current disposal value of the old machine is $81,000; if it is kept 9 more years, its residual value would be $18,000. Required Calculate the total costs in keeping the old machine and purchase a new machine. Should the old machine be replaced? Keep Old Machine Total costs Should the old machine be replaced? Purchase New Machine

A machine purchased three years ago for $318,000 has a current book value using straight-line depreciation of $192,000; its operating expenses are $39,000 per year. A replacement machine would cost $227,000, have a useful life of nine years, and would require $10,000 per year in operating expenses. It has an expected salvage value of $71,000 after nine years. The current disposal value of the old machine is $81,000; if it is kept 9 more years, its residual value would be $18,000. Required Calculate the total costs in keeping the old machine and purchase a new machine. Should the old machine be replaced? Keep Old Machine Total costs Should the old machine be replaced? Purchase New Machine

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 14P

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