Accounting

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

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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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