College Town Pizza's owner bought his current pizza oven two years ago for \($10,500\) , and it has one more year of life remaining. He is using straight-line depreciation for the oven. He could purchase a new oven for \($2,200\), but it would last only one year. The owner figures the new oven would save him \($3,000\) in annual operating expenses compared to operating the old one. Consequently, he has decided against buying the new oven, since doing so would result in a "loss" of \($500\) over the next year.

Required:
1. How do you suppose the owner came up with \($500\) as the loss for the next year if the new pizza oven were purchased? Explain.
2. Criticize the owner's analysis and decision.
3. Prepare a correct analysis of the owner's decision.