Current Machine New Machine

Original cost $$60,000$ $$50,000$

Accumulated depreciation $ $5,000$

Current salvage value $$40,000$

Remaining life $5$ years $5$ years

Annual operating expenses $$10,000$ $ $7,500$

Disposal value in $5$ years $ $0$ $ $0$

Required:

Which costs are sunk?

Which costs are relevant?

What are the net cash flows over the next $5$ years assuming you purchase the new machine?

What other items should you consider when making this decision?