the current disposal or sale value of the old machine is pound 40 000 and it will be 610110

A division within Rhine Autos purchased a machine three years ago for £180 000. Depreciation using the straight line basis, assuming a life of six years and with no salvage value, has been recorded each year in the financial accounts. The present written-down value of the equipment is £90 000 and it has a remaining life of three years. Management is considering replacing this machine with a new machine that will reduce the variable operating costs. The new machine will cost £70 000 and will have an expected life of three years with no scrap value. The variable operating costs are £3 per unit of output for the old machine and £2 per unit for the new machine. It is expected that both machines will be operated at a capacity of 20 000 units per annum. The sales revenues from the output of both machines will therefore be identical. The current disposal or sale value of the old machine is £40 000 and it will be zero in three years time.