Current Attempt in Progress

Obo Company has a machine with a book value of $$50,000$ and a five$-$year remaining life. A new machine is available at a cost of $$108,000$ and Obo can also receive $$38,000$ for trading in the old machine. The new machine will reduce variable manufacturing costs by $$14,000$ per year over its five$-$year life. Should the machine be replaced?

Yes, because income will increase by $$14,000$ per year.

Obo will not be better or worse off by replacing the machine.

Yes, because income will increase by $$52,000$ immediately.

No$,$ because the company will be $$108,000$ worse off.