Multiple Choice
Janko Wellspring Inc.has a pump with a book value of $24,000 and a four-year remaining life.A new,more efficient pump,is available at a cost of $45,000.Janko can also receive $8,000 for trading in the old pump.The new pump will reduce variable costs by $10,000 per year over its four-year life.Should the pump be replaced?
A) Yes,because income will increase by $3,000 in total.
B) Yes,because income will increase by $3,000 per year.
C) No,because the company will be $3,000 worse off in total.
D) No,because income will decrease by $10,000 per year.
E) No,Janko will record a loss of $16,000 if they replace the pump.
Correct Answer:
Verified
Correct Answer:
Verified
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