Reference no: EM133059181

Question - A machine purchased three years ago for $820,000 has a current book value using straight-line depreciation of $450,000; its operating expenses are $65,000 a year. A replacement machine would cost $520,000, have a useful life of nine years, and would require $30,000 per year in Operating expenses. It has an expected salvage value of $175,000 after nine years. The current disposal value of the old machine is $195,000; if it is kept 9 more years, its residual value would be $40,000. Based on this information, should the old machine be replaced? Support your work.