Comprehensive Problem Instructions: The Woodruff Corporation purchased a piece of equipment three years ago for $$250,000.$ It has an asset depreciation range $($ADR$)$ midpoint of eight years. The old equipment can be sold for $$90,000.$ A new piece of equipment can be purchased for $$330,000.$ It also has an ADR of eight years. Assume the old and new equipment would provide the following operating gains $($or losses$)$ over the next six years: Ye New Equipment Old Equipment Year $1$ $$80,000$ $$25,0001276,00016,0002370,0009,0003460,0008,0004550,0006,0005645,000(9,000)6$Questions: The firm has a $25$ percent tax rate and a $9$ percent cost of capital.

Should the new equipment be purchased to replace the old equipment? Then, consider any qualitative factors or risks that could influence the decision, such as potential operational disruptions, technological advancements, or changes in market demand.

Assess how changes in the cost of capital, tax rate, or expected operating gains might affect your decision. Which variable is the most critical?

Explain your answer, highlighting both the quantitative results and qualitative considerations.