Question: Pizza For Everyone is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information

Pizza For Everyone is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van follow:

Existing van New van

Original cost $50,000 $90,000

Annual operating cost $ 17,500 $ 10,000

Accumulated depreciation $ 30,000

Current salvage value of the existing van $ 22,500

Remaining life 10 years 10 years

Salvage value in 10 years $ 0 $ 0

Annual depreciation $ 2,000 $ 9,000

If Pizza For Everyone replaces the existing delivery van with the new one, over the next 10 years operating income will ________.

increase by $75,000

increase by $90,000

decrease by $90,000

decrease by $75,000

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