Asset replacement decision Weldon Electronics purchased a manufacturing plant four years ago for $7,500,000. The plant costs

$2,000,000 per year to operate. Its current book value using straight-line depreciation is $5,500,000.

Weldon could purchase a replacement plant for $12,000,000 that would have a useful life of 10 years.

Because of new technology, the replacement plant would require only $500,000 per year in operating expenses. It would have an expected salvage value of $1,000,000 after 10 years. The current disposal value of the old plant is $1,400,000, and if Weldon keeps it 10 more years, its residual value would be

$500,000.

Required Based on this information, should Weldon replace the old plant? Support your answer with appropriate computations.