Chris co. is considering replacing an old machine. the old machine was purchased for $100,000 and has a book value of $40,000 and should last four more years. chris co. believes that it can sell the old machine for $50,000. the new machine cost $80,000 and will have a 4-year life and a $10,000 salvage value. currently, it cost $20,000 annually to operate the old machine. the new machine is more efficient and should reduce operating cost by 50%. based on quantitative analysis, calculate the relevant costs and indicate if chris co. should replace the old machine?
a. no, because the relevant cost of the new machine is $10,000 more than the cost of the old machine.
b. yes, because the relevant cost of the new machine is $10,000 less than the cost of the old machine.
c. no, because the relevant cost of the new machine is $20,000 more than the cost of the old machine.
d. yes, because the relevant cost of the new machine is $20,000 less than the cost of the old machine.