Elrod Company is considering replacement of some of its manufacturing equipment. Information regarding the existing equipment and the potential replacement equipment follows.

*The amounts shown for operating expenses are the cumulative total of all such expected expenses to be incurred over the useful life of the equipment.
Required
Based on this information, recommend whether to replace the equipment. Support your recommendation with appropriatecomputations.

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Existing Equipment Replacement Equipment Cost $90,000 Cost Operating expenses Salvage value Market value Book value Remaining usetul life 15,000 Operating expenses 10,000 Salvage value 60,000 Useful life 33,000 $95,000 95,000 12,000 8 years 8 years