Reference no: EM132559256

Carrot Company is considering whether to replace a piece of equipment with a newer model. The following data have been collected:

                                      Old Equipment            New Equipment

Purchase price               $4,400                     $6,400

Accumulated depreciation  $1,700                     - 0 -

Annual operating costs      $7,500                       $3,800

Remaining useful life              5 years                  5 years

If the old equipment is replaced now, it can be sold for $1,200. Both the old equipment and new equipment have a useful life of 5 years.

Question 1: What is the net advantage (disadvantage) of replacing the old equipment with the new equipment?

Option 1: ($12,100)

Option 2: $12,100

Option 3: ($13,300)

Option 4: $13,300