Maxwell Manufacturing is contemplating the purchase of a new machine to replace a machine that has been in use for seven years.The old machine has a net book value of $50,000 and still has five years of useful life remaining.The old machine has a current market value of $5,000,and would have no market value after five years.The variable operating costs and depreciation expenses (straight-line)are $135,000 per year.The new machine will cost $90,000,has an estimated useful life of five years with zero disposal value after five years,and an annual operating expense of $118,000 (including straight-line depreciation).Considering the five years in total and ignoring the time value of money and income taxes,what is the difference in total relevant decision-making costs if the old machine is replaced?
A)$5,000.
B)$15,000.
C)$25,000.
D)$35,000.
E)$40,000.

Question

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The Answer of Maxwell Manufacturing is contemplating the purchase of a new machine to replace a machine that has been in use for seven years.The old machine has a net book value of $50,000 and still has five years of useful life remaining.The old machine has a current market value of $5,000,and would have no market value after five years.The variable operating costs and depreciation expenses (straight-line)are $135,000 per year.The new machine will cost $90,000,has an estimated useful life of five years with zero disposal value after five years,and an annual operating expense of $118,000 (including straight-line depreciation).Considering the five years in total and ignoring the time value of money and income taxes,what is the difference in total relevant decision-making costs if the old machine is replaced?
A)$5,000.
B)$15,000.
C)$25,000.
D)$35,000.
E)$40,000.

Maxwell Manufacturing Is Contemplating the Purchase of a New Machine