Replacement Decisions $($LO$6)$ An officer for a large construction company is feeling nervous. The anxiety is caused by a

new excavator just released onto the market. The new excavator makes the one purchased by the company a year ago

obsolete. As a result, the market value for the company's excavator has dropped significantly, from $$600,000$ a year ago to

$$50,000$ now. In ten years, it would be worth only $$3,000.$ The new excavator costs only $$950,000$ and would increase

operating revenues by $$90,000$ annually. The new equipment has a ten$-$year life and expected salvage value of $$175,000.$

What should the officer do$?$ The tax rate is $35\%,$ the CCA rate is $25\%$ for both excavators, and the required rate of return

for the company is $14\%.$