led Davanit to consider either upgrading or replacing the production equipment. The following table presents data for the two alternatives:

View the data.

Read the requirements.

Over $3$ years

Answer the following questions.

Should Davanit Company replace or upgrade the equipment?

When comparing relevant costs between the choices, is replacing the equipment lower or higher than the cost to upgrade? Davanit would be willing to pay to replace the old equipment rather than upgrade it$?$

What is the maximum one$-$time equipment cost that Davanit would be willing to pay? production and sales quantity would Davanit $($a$)$ upgrade the equipment or $($b$)$ replace the equipment? $($Round your answer to the nearest whole number.$)$

Davanit would want to upgrade if the production and sales quantity was

less than how many units for the three years? current bonus is his primary concern. Which alternative would Doria choose? Explain. $($Round your answers to the nearest whole dollar. Do not leave any cells blank.$)$

All equipment costs will continue to be depreciated on a straight$-$line basis. For simplicity, ignore income taxes and the time value of money. Requirement $4.$ Assume that all data are as given in the original exercise. Dan Doria is Davanit's manager, and his bonus is based on operating income. Because he is likely to relocate after about a year, his current bonus is his primary concern. Which alternative would Doria choose? Explain. $($Round your answers to the nearest whole dollar. Do not leave any cells blank.$)$

Use the table below to compute the operating income for each of the options.

This exercise illustrates the possible conflict between the decision model and the performance evaluation model. Answer the following questions. Is first$-$year income higher or lower under the upgrade alternative?

By how much is first$-$year income different under the upgrade alternative?

With his one$-$year horizon and operating incomebased bonus, will Dan Doria choose the replace or upgrade alternative?

As seen in requirement $1,$ is the upgrade or replace alternative better in the long run for Davanit?