Major Nelson Company is considering replacing a machine that is presently used in the production of its product. The following data are available: Replacement Old Machine Machine Original cost $57,000 $35,000 Useful life in years 17 5 Current age in years 12 0 Book value $39,000 ‐ Disposal value now $8,000 ‐ Disposal value in 5 years 0 0 Annual cash operating costs $7,000 $4,000 The difference in cost between keeping the old machine and replacing the old machine, ignoring income taxes, is:
A.
a. $22,000 in favor of keeping the old machine
B.
b. $12,000 in favor of keeping the old machine
C.
c. $37,000 in favor of replacing the old machine
D.
d. $22,000 in favor of replacing the old machine