The owner of the College Town pizza shop-bought his current pizza oven three years ago for $16,000 and the oven has one year left. He uses straight-line depreciation for the oven, he can buy a new one. At a cost of $3,000, but only for a year, the operating cost of the new oven is $2,500, and the operating cost of the old oven is currently $5500. A customer bought an old oven for $500, so he decided not to buy a new one, as doing so would result in a $1,000 "loss" next year.

Required:

1. How do you think the owner will receive $1,000 as a loss for the next year if they buy a new pizza oven? Explain.

2. Review the analysis and decision of the owner.

3. Prepare the decision analysis of the correct owner.