Sawyer Inc is considering disposing of a machine with a book value of $90,000 and an estimated remaining life of three years. The old machine can be sold for $25,000. A new machine with a purchase price of $275,000 is being considered as a replacement. It will have a useful life of three years and no salvage value. It is estimated that annual operating costs will be reduced from $175,000 to $80,000 if the new machine is purchased. Should Sawyer retain or replace the equipment?

Select one:

a. Replace; save $110,000

b. Retain; save $35,000

c. Replace; save $35,000

d. Replace; save $110,000