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:

• The old machine was purchased three years ago for $312,000 and has a current book value using straight-line depreciation of $179,000.
• The old machine incurs operating expenses of $31,000 per year.
• The current disposal value of the old machine is $80,000; if it is kept eleven more years, its remaining value would be $10,000.
• The replacement machine would cost $226,000 and have a useful life of eleven years.
• The replacement machine has an expected salvage value of $69,000 after eleven years.
• The replacement machine would require $11,000 per year in operating expenses.

Required

Calculate the total costs in keeping the old machine and purchase a new machine. Should the old machine be replaced?