Chung Inc. is considering the replacement of a piece of equipment with a newer model. The following data has been collected:
Old Equipment New Equipment
Purchase price $225,000 $375,000
Accumulated depreciation 90,000 - 0 -
Annual operating costs 300,000 240,000
If the old equipment is replaced now, it can be sold for $60,000. Both the old equipment's remaining useful life and the new equipment's useful life is 5 years.
The net advantage (disadvantage) of replacing the old equipment with the new equipment is
a) $90,000
b) $(75,000)
c) $60,000
d) $(15,000)
d) $(15,000)
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