Question: Janko Wellspring Inc. has a pump with a book value of $35,000 and a 4-year remaining life. A new, more efficient pump, is available at

Janko Wellspring Inc. has a pump with a book value of $35,000 and a 4-year remaining life. A new, more efficient pump, is available at a cost of $56,000. Janko can also receive $9100 for trading in the old pump. The new pump will reduce variable costs by $13,100 per year over its four-year life. Should the pump be replaced?

Yes, because income will increase by $5500 in total.

No, because income will decrease by $13,100 per year.

No, because the company will be $5500 worse off in total.

No, Janko will record a loss of $18,200 if they replace the pump.

Yes, because income will increase by $5500 per year.

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