Janko Wellspring Incorporated has a pump with a book value of $29,000 and a four-year remaining life. A new, more efficient pump is available at a cost of $50,000. Janko can receive $8,500 for trading in the old pump. The old machine has variable manufacturing costs of $30,000 per year. The new pump will reduce variable costs by $11,400 per year over its four-year life. Should the pump be replaced? why or why not?

Answer rating: 100% (QA)

To determine whether the pump should be replaced we need to perform a cost analysis considering both ... View the full answer