Question
Flowers For Everyone is considering replacing its existing delivery van with a new one. The new van will cost $180,000, but can offer considerable savings
Flowers For Everyone is considering replacing its existing delivery van with a new one. The new van will cost $180,000, but can offer considerable savings in operating costs. Information about the existing van and the new van follow:
Existing Van | New Van | |
Purchase Price (Historical Cost) | $100,000 | $180,000 |
Annual Operating Cost (does not include depreciation) | $35,000 | $20,000 |
Accumulated Depreciation | $60,000 | N/A |
Market value of van (i.e. current salvage value) | $45,000 | $180,000 |
Remaining useful life | 10 years | 10 years |
Salvage value in 10 years | $0 | $0 |
If Flowers For Everyone replaces the existing delivery van with the new one, what will the effect on total income be over the next 10 years? (Ignore taxes and the time value of money. Enter an increase in profits as a positive number and a decrease in profits as a negative number.)
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