(Asset replacement) Modern Products Co. purchased new computer scheduling software on April 1, 2001, for $120,000 to manage its production. On May 15, 2001, a representative of a computerized manufacturing technology company demonstrated new software that was clearly superior to that purchased by the firm earlier in the year. The price of this software is $210,000. Corporate managers estimate that the new software would save the company $18,000 annually in schedule-related costs compared to the recently installed software.

Both software systems should last 10 years (the expected life of the computer hardware) and have no salvage value at that time. The company can sell its existing software for $60,000 if it chooses to purchase the new system. Should the company keep and use the software purchased earlier in the year or buy the new software?