Question: Dragoo Building Incorporated has a pump with a book value of $260,000 and a four-year remaining life. A new pump is available at a cost

Dragoo Building Incorporated has a pump with a book value of $260,000 and a four-year remaining life. A new pump is available at a cost of $635,000. Dragoo can receive $50,000 for trading in the old pump. The old pump has variable costs of $330,000 per year. The new pump will reduce variable costs by $149,100 per year over its four-year life. The total impact to Dragoo Building Incorporated over the pumps four-year life is:

Multiple Choice

Decrease of $11,400.

Decrease of $50,000.

Increase of $596,400.

Increase of $11,400.

Decrease of $635,000.

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