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Chung Inc If the Old Equipment Is Replaced Now, It Can Be

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Use the following information for questions
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 90,0000 Annual operating costs 300,000240,000\begin{array}{lrr}&\text { Old Equipment}&\text { New Equipment }\\\text { Purchase price } & \$ 225,000 & \$ 375,000 \\\text { Accumulated depreciation } & 90,000 & -0- \\\text { Annual operating costs } & 300,000 & 240,000\end{array} 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

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Definitions:

Interest

The charge for borrowing money, typically expressed as an annual percentage of the loan amount, or the return earned on investment capital.

Inventory

The complete quantity of products and supplies kept in inventory by a company, aimed for either sale or manufacturing activities.

Depreciation

Depreciation is the allocation of the cost of a tangible asset over its service life, reflecting the decrease in value due to wear and tear, age, or obsolescence.

Net Investment

The difference between total investment in new physical assets and depreciation on existing assets, indicating the net increase in the capital stock of an economy.

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