Olive Industries is considering replacing a machine that is presently used in its production process. The following information is available:

	Old Machine	Replacement Machine
Original cost	$45,000	$22,000
Remaining useful life in years	4	4
Current age in years	4	0
Book value	$10,000
Current disposal value in cash	$7,000
Future disposal value in cash (in 5 years)	$0	$0
Annual cash operating costs	$7,000	$3,000

Based on the data above, what would the effect be on the company of replacing the equipment? (Ignore the age of the old equipment.)

Question 8 options:

	A loss of $30,000.
	A gain of $2,000.
	A net gain of $0.
	A net gain of $5,000.