Carrot Company is considering whether to replace a piece of equipment with a newer model. The following data has been collected:
Old EquipmentNew EquipmentPurchase price$5,800$8,000
Accumulated depreciation3,300- 0 –
Annual operating costs9,10010,800
If the old equipment is replaced now, it can be sold for $1,000.
Both the old equipment’s remaining useful life and the new equipment’s useful life is 5 years.
What is the net advantage (disadvantage) from replacing the old equipment with the new equipment?
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