Cathy, a store manager of Katy Food., replaced the convection oven two years ago. Today, Katy Food announced the availability of a new convection oven that cooks more quickly with lower operating expenses. Cathy is considering the purchase of this faster, lower-operating cost convection oven to replace the existing one they recently purchased.

Selected information about the two ovens is given below:

	Current Oven	New Oven
Original cost	$90,000	$75,000
Accumulated depreciation	$18,000	?
Current salvage value	$30,000	?
Remaining life	5 years	5 years
Annual operating expenses	$15,000	$10,000
Disposal vale in 5 years	$0	$0

Required:

a. What costs are sunk? b. What costs are relevant? c. What are the net cash flows over the next 5 years assuming the Katy Food purchases the new convection oven? d. What other items should Cathy, as manager of the company, consider when making this decision?