Janko Wellspring Incorporated has a pump with a book value of $25,000 and a four-year remaining life. A new, more efficient pump is available at a cost of $46,000. Janko can receive $8,100 for trading in the old pump. The old machine has variable manufacturing costs of $26,000 per year. The new pump will reduce variable costs by $10,100 per year over its four-year life. Should the pump be replaced?

Multiple Choice

Yes, because income will increase by $2,500 in total.

Yes, because income will increase by $2,500 per year.

No, because the company will be $2,500 worse off in total.

No, because income will decrease by $10,100 per year.

No, Janko will record a loss of $16,200 if they replace the pump.