Answer:
Kim Inc.
The net advantage (disadvantage) of replacing the old equipment with the new equipment is:
= $7,500.
Explanation:
a) Data and Calculations:
                                                      Old Equipment     New Equipment   
Purchase price                                 $262,500              $450,000 
Accumulated depreciation                  95,000               0  
Annual operating costs                     300,000                245,000
Total operating costs for 10 years 3,000,000             2,450,000
Salvage                                                 92,500             0
Total incremental cost                 $2,907,500           $2,900,000
b) The net advantage obtained by Kim for replacing the old equipment with the new equipment is $7,500 ($2,907,500 - $2,900,000).  Note that the purchase price of the old equipment with its accumulated depreciation are not relevant costs.  This case is worked out without taking into account the time value of money.  Assuming that the present value of the cash flows was computed, a different result and conclusion would be reached.