The Furnitech Company produces and sells 7,500 modular computer desks per year at a selling price of 5375 each. Its current production equipment, purchased for $900,000 and with a 5-year useful life, is only 2 years old. The equipment has a terminal disposal value of $0 and is depreciated on a straight-line basis. The equipment has a current disposal price of $225,000. However, the emergence of a new molding technology has led Furnitech to consider either upgrading or replacing the production equipment. The following table presents data for the two alteratives: (Click to view the data for the two alternatives.) All equipment costs will continue to be depreciated on a straight-line basis. For simplicity, ignore income taxes and the time value of money, Read the requirements. Upgrade Replace Based on the equation above, Furnitech will upgrade when your Requirement 4. Assume that all data are as given in the original exercise. Dan Douglas is Furnitech's manager, and his bonus is based on operating income. Because he is likely to relocate after about a year, his current bonus is his primary concern. Which alternative would Douglas choose? Explain. Begin by calculating the operating income under each altemative. (Leave cells blank if account balance is zero.) i Data Table Over 1 Year Upgrade Replace Revenues Upgrade Replace Cash operating costs 787,500 One-time equipment costs $ 1,500,000 $ 2,400,000 Depreciation 680,000 800,000 Variable manufacturing costs per desk $ 75.00 $ 37.50 Loss on disposal of old equipment Remaining useful life of equipment (years) 3 Total costs Terminal disposal value of equipment 0 $ 0 562,500 Operating income Print Done Choose from any list or enter any number in the input fields and then click Check