WIldflowers florists has an old Delivery van that it uses to deliver flowers to customers. Fred the owner of Wildflowers is considering replacing the old van with a new one but he is not sure what is the best decision. The old van was originally purhchased for 20,000 dollars and still has a remaining book value of 6,000. With some extra maintenence each year, fred thinks the old van could last another 5 full years (with 0 scrap value at the end of the 5 years). He estimates that the annual maintenence costs to be about 3,000 per year- this includes all repairs.

If fred replaces the old van, he can get a newer used van for 22,000. This van is a less expensive brand than the original, and Fred estimates that he would also get 5 years out of the new van( also with 0 scrap value at the end). However, the newer van would not requires any maintence costs except for 500 per year for oil chances. If he decides to purchase the newer van, he could sell his old van for 5,000.

Based on this, Fred should:

a. buy the new van, since it would be less expensive by 1,500

b. keep the old van, because it would be less expensive by 4.500

c. buy the new van, because this option would be less expensive by 12,500

d keep the old van because this option would be less expensive by 5,500