The Woodruff Corporation purchased a piece of equipment three years ago for $230,000. It has an asset depreciation range (ADR) midpoint of eight years. The old equipment can be sold for $90,000. A new piece of equipment can be purchased for $320,000. It also has an ADR of eight years. Assume the old and new equipment would provide the following operating gains (or losses) over the next six years: Ye New Equipment $80,000 Year 1 2 3 2 76,000 3 Old Equipment $25,000 16,000 9,000 8,000 6,000 (7,000) 70,000 14 $50,000 O O AWN 15 50,000 5 6 16 45,000 Question: The firm has a 25 percent tax rate and a 9 percent cost of capital. Should the new equipment be purchased to replace the old equipment? Explain your