Tak Company has a machine with a book value of $50,000 and a remaining five-year useful life.

Question:

Tak Company has a machine with a book value of $50,000 and a remaining five-year useful life. A new machine is available at a cost of $75,000, and Tak can also receive $40,000 for trading in its old machine. The new machine will reduce variable manufacturing costs by $12,000 per year over its five-year useful life. Should the machine be replaced?