Chung Inc. 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 $ 75,000 $125,000
Accumulated depreciation 30,000 - 0 -
Annual operating costs 100,000 80,000
If the old equipment is replaced now, it can be sold for $20,000. Both the old equipment's remaining useful life and the new equipment's useful life is 5 years.
The net advantage (disadvantage) of replacing the old equipment with the new equipment is:
a) $20,000
b) $(5,000)
c) $(25,000)
d) $30,000