Sim Company is considering whether to replace some of its manufacturing equipment. Information pertaining to the existing equipment and the potential replacement equipment follows:

Required
Based on this information, recommend whether to replace the equipment. Support your recommendation with appropriate computations.

Exlsting Equlpment Replacement Equipment Cost Operating expenses* Salvage value Market value Book value Remaining useful life $30,000 Cost 24,000 Operating expenses 4,000 Salvage value 8,500 10,500 $27,000 4,000 8,000 10 years Useful life 10 years The amounts shown for operating expenses are the cumulative total of all such expenses expected to be incurred over the useful life of the equipment.