Question: Kendra Company is considering replacing an old machine. The old machine was purchased for $100,800 and has a book value of $40,800 and should last

Kendra Company is considering replacing an old machine. The old machine was purchased for $100,800 and has a book value of $40,800 and should last four more years with no salvage value. The company believes that it could currently sell the old machine for $20,800. The new machine cost $80,800 and will have a 4-year life and a $10,800 salvage value. Currently, it costs $20,800 annually to operate the old machine. The new machine is more efficient and should reduce operating cost by 50%. Based on quantitative analysis, should Kendra Company replace the old machine?

A. Yes, because the relevant cost of the new machine is $9,200 less than the old machine.

B. No, because the relevant cost of the new machine is $20,800 more than the old machine.

C. No, because the relevant cost of the new machine is $7,600 more than the old machine.

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