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

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 Operating expenses* Salvage value Market value Book value Remaining useful life $125,000 80,000 20,000 8 years $150,000Cost 120,000 20,000 60,000 45,000 8 years Operating expenses Salvage value Useful life 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