Mountain Gear Has Been Using the Same Machines to Make

Multiple Choice

Mountain Gear has been using the same machines to make its name-brand clothing for the last five years.A cost efficiency consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery.The old machines cost the company $100,000.The old machines presently have a book value of $60,000 and a market value of $6,000.They are expected to have a five-year remaining life and zero salvage value.The new machines would cost the company $50,000 and have operating expenses of $9,000 a year.The new machines are expected to have a five-year useful life and no salvage value.The operating expenses associated with the old machines are $15,000 a year.The new machines are expected to increase quality,justifying a price increase and thereby increasing sales revenue by $5,000 a year.Select the true statement.

A) The company will be $11,000 better off over the five-year period if it replaces the old equipment.
B) The company will be $20,000 better off over the five-year period if it keeps the old equipment.
C) The company will be $12,000 better off over the five-year period if it replaces the old equipment.
D) The company will be $6,000 better off over the five-year period if it replaces the old equipment.