Fenwick Company is considering whether to replace some of its manufacturing equipment. Information pertaining to the existing equipment and the potential replacement equipment follows:

Required
Based on this information, recommend whether to replace the equipment. Support your recommendation with appropriate computations.

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Replacement Equipment Existing Equipment $45,000 48,000 8,000 16,000 21,000 10 years Cost Operating expenses* Salvage value Market value Book value Remaining useful life *The amounts shown for operating expenses are the cumulative total of all such expenses expected to be incurred over the useful ife of the equipment. Cost $42,000 Operating expenses* Salvage value Useful life 10,000 10 years