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.
What is the net cost of the new equipment?
a) $375,000
b) $315,000
c) $150,000
d) $75,000
b) $315,000
Business
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