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 A machine purchased three years ago for $305,000 has a current book value using straight-line depreciation of $186,000, its operating expenses are $36,000 per year. A replacement machine would cost $228,000, have a useful life of nine years, and would require $8,000 per year in operating expenses. It has an expected salvage value of $79.000 after nine years. The current disposal value of the old machine is $87,000, if it is kept nine more years, its residual value would be $12,000, 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 $ 399,000 Should the old machine be replaced? Purchase New Machine Yes
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 A machine purchased three years ago for $305,000 has a current book value using straight-line depreciation of $186,000, its operating expenses are $36,000 per year. A replacement machine would cost $228,000, have a useful life of nine years, and would require $8,000 per year in operating expenses. It has an expected salvage value of $79.000 after nine years. The current disposal value of the old machine is $87,000, if it is kept nine more years, its residual value would be $12,000, 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 $ 399,000 Should the old machine be replaced? Purchase New Machine Yes
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...
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