The equipment was purchased 3 years ago by the Ajax Corporation for $1,20,000. When purchased, it had an expected service life of 10 years, an estimated salvage of $25,000 after 10 years and AOC of $30,000. Current account book value is $80,000. The system is deteriorating rapidly; 3 more years of use and then salvaging it for $10,000 are now the expectations. The AOC is averaging $30,000. An improved version is offered today for $100,000 with a trade-in of $70,000 for the current system. The price goes up next week to $110,000 with a trade in of $70,000. The engineer estimates the new equipment to have useful life of 10 years, a salvage of $20,000, and an AOC of $20,000. A $70,000 market value appraisal of the current machine was made today. What would be the decision, if a replacement study is made today.
The equipment was purchased 3 years ago by the Ajax Corporation for $1,20,000. When purchased, it had an expected service life of 10 years, an estimated salvage of $25,000 after 10 years and AOC of $30,000. Current account book value is $80,000. The system is deteriorating rapidly; 3 more years of use and then salvaging it for $10,000 are now the expectations. The AOC is averaging $30,000. An improved version is offered today for $100,000 with a trade-in of $70,000 for the current system. The price goes up next week to $110,000 with a trade in of $70,000. The engineer estimates the new equipment to have useful life of 10 years, a salvage of $20,000, and an AOC of $20,000. A $70,000 market value appraisal of the current machine was made today. What would be the decision, if a replacement study is made today.
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