AM Cotton Industries is considering replacing a machine that is presently used in its

production process. The following information is available:

Old Machine

Replacement

Machine

Original cost $$55,000$ $$35,000$

Remaining useful life in years $55$

Current age in years $50$

Book value $$30,000$

Current disposal value in cash $$8,000$

Future disposal value in cash $($in $5$ years$)$ $$20,000$ $$22,000$

Annual cash operating costs $$17,000$ $$14,000$

The old machine can be sold immediately if the new machine is purchased. If the old

machine is replaced, the effect on net cash flow over the $5$ years will be $($ignore time value

of money$)$:

a$.$ $$0$ i$.$e$.$ no effect on cash flows

b$.$ A cost of $$10,000$

c$.$ A cost of $$35,000$

d$.$ A saving of $$15,000$