Brewton Freight Company owns a truck that cost $35,000. Currently, the truck’s book value is $20,000, and its expected remaining useful life is four years. Brewton has the opportunity to purchase for $26,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,000 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $12,000.
Should Brewton replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out? Explain.