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Sheridan Company is considering the replacement of a piece of equipment with a newer model. The following data has been collected: Old Equipment New Equipment
Sheridan Company is considering the replacement of a piece of equipment with a newer model. The following data has been collected:
Old Equipment | New Equipment | ||
Purchase price | $225000 | $375000 | |
Accumulated depreciation | 90000 | - 0 - | |
Annual operating costs | 308000 | 255000 |
If the old equipment is replaced now, it can be sold for $60000. Both the old equipments remaining useful life and the new equipments useful life is 5 years. The company uses straight-line depreciation with a zero salvage value for all of its assets. The net advantage (disadvantage) of replacing the old equipment with the new equipment is
| $60000 |
| $(15000) |
| $(83000) |
| $90000` |
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