Cocoa Beach Company Is Considering Replacing a Machine That Is

Multiple Choice

Cocoa Beach Company is considering replacing a machine that is presently used in the production of its product. The following data are available: $\begin{array}{lll}&& \text { Replacement } \\&\text { Old Machine } & \text { M achine }\\\text { Original cost } & \$ 333,000 & \$ 222,000 \\\text { Useful life in years } & 10 & 5 \\\text { Current age in years } & 5 & 0 \\\text { Book value } & \$ 100,000 & - \\\text { Disposal value now } & \$ 32,000 & - \\\text { Disposal value in 5 years } & 0 & 0 \\\text { Annual cash operating } & \$ 20,000 & \$ 14,000\ \\text { costs} \\\end{array}$ Ignoring income taxes, the difference in cost between the old and new machine is:

A) $98,000 in favor of the old machine
B) $40,000 in favor of the new machine
C) $12,000 in favor of the new machine
D) $98,000 in favor of the new machine