Chung Incis Considering the Replacement of a Piece of Equipment with with a Newer

question 55

Multiple Choice

Chung Inc.is considering the replacement of a piece of equipment with a newer model.The following data has been collected: $\begin{array}{lrr}&\text { Old Equipment }&\text { New Equipment }\\\text { Purchase price } & \$ 225,000 & \$ 375,000 \\\text { Accumulated depreciation } & 90,000 & -0- \\\text { Annual operating costs } & 300,000 & 240,000\end{array}$ 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.
- What is the net cost of the new equipment?

• A)$375,000
• B)$315,000
• C)$150,000
• D)$75,000

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Definitions:

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