Werner Fishing Tours, Inc., owns a boat that originally cost $240,000. Currently, the boat’s net book value is $72,000, and its expected remaining useful life is four years. Werner has an opportunity to purchase for $160,000 a replacement boat that is extremely fuel efficient. Fuel costs for the old boat are expected to be $30,000 per year more than fuel costs would be for the replacement boat. Werner could sell the old boat, which is fully paid for and in good condition, for only $64,000.
Should Werner replace the old boat with the new fuel-efficient model, or should it continue to use the old one until it wears out? Explain.