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Nguyen Company is contemplating the replacement of an old machine with a new one. The following information has been gathered: Old Machine New Machine Purchase

Nguyen Company is contemplating the replacement of an old machine with a new one. The following information has been gathered:

Old Machine New Machine
Purchase price $4,200 $6,200
Accumulated depreciation $1,500 - 0 -
Annual operating costs $5,400 $3,600
Remaining useful life 10 years 10 years

If the old machine is replaced, it can be sold for $2,000. Both the old equipment and new equipment have a useful life of 10 years. What is the net advantage (disadvantage) of replacing the old machine with the new machine?

$11,800

$13,800

($13,800)

($11,800)

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