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Mountain Gear has been using the same machines to make its name$-$brand clothing for the last five years. A cost efficiency consultant has suggested that production costs may be reduced by purchasing more technologically advanced machinery. The old machines cost the company $$100,000.$ The old machines presently have a book value of $$60,000$ and a market value of $$6,000.$ They are expected to have a five$-$year remaining life and zero salvage value. The new machines would cost the company $$50,000$ and have operating expenses of $$9,000$ a year. The new machines are expected to have a five$-$year useful life and no salvage value. The operating expenses associated with the old machines are $$15,000$ a year. The new machines are expected to increase quality, justifying a price increase and thereby increasing sales revenue by $$5,000$ a year. Select the true statement.

Multiple Choice

The company will be $$6,000$ better off over the five$-$year period if it replaces the old equipment.

The company will be $$12,000$ better off over the five$-$year period if it replaces the old equipment.

The company will be $$11,000$ better off over the five$-$year period if it replaces the old equipment.

The company will be $$20,000$ better off over the five$-$year period if it keeps the old equipment.

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