Since purchasing new gear will reduce cash flow by $5,000, the corporation should keep its old equipment, and the calculation can be defined as follows:
<h3 /><h3>Calculating the Total decrease in net income:</h3>The following are the costs if the company keeps the old equipment:
$30,000 x 3 years = $90,000 So, the total cost is $90,000.
The following are the costs if the company purchases new equipment:
Calculating the equipment cost that is
$75,000 - $10,000 = $65,000.
$10,000 x 3 years = $30,000. So, the total cost is $95,000.
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