New England Ski Co. is considering replacing an existing piece of equipment that can be sold immediately for $34,000. If not replaced immediately, it can be used for the next eight years when its salvage value will be $7,500. The new equipment being considered will also have a useful life of eight years when it can be sold for 10% of its current acquisition cost of $175,000. If purchased, the new equipment will have the following associated costs: shipping - $6,500; sales tax - $14,800; and, installation - $9,600. - By replacing the old equipment with the new machine, New England Ski will be able to increase annual sales from 3,000 units to 5,000 units. The following table lists details of sales price and production costs. Price per unit $150 Direct variable cost per unit $55 Indirect variable cost per unit $15 Sales commission 8% of Sales Shipping and packaging cost per unit $30 Incremental fixed cost $35,000 Depreciation - Straight line 8 years What is the annual depreciation on the new machine? How should New England treat it? $19,688; include in cash flows $21,875; include in cash flows $21,875; exclude $19,688; exclude