Question
Several years ago, a firm acquired old equipment for $20,000. It costs $7,500 per year in order to operate the old equipment. They could sell
Several years ago, a firm acquired old equipment for $20,000. It costs $7,500 per year in order to operate the old equipment. They could sell it today for $4,000. A replacement could be purchased for $30,000 and would cost $1,500 per year to operate. Assume either piece of equipment will last 10 more years. Salvage values equal zero. Should the firm replace or keep the old equipment, why?
Group of answer choices
The firm will save $6,000 over ten years if they keep the old equipment.
The firm will save $6,000 over ten years if they replace the old equipment.
The firm will save $34,000 over ten years if they replace the old equipment.
The firm will save $34,000 over ten years if they keep the old equipment.
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